TIDM32SS
RNS Number : 8399K
National Bank of Canada
30 August 2023
National Bank of Canada
August 30(th) , 2023
Regulatory Announcement (Part 2)
Q3 2023 Results
National Bank of Canada (the "Bank") announces publication of
its Third Quarter 2023 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 2023 Report to
Shareholders, please click on the following link:
http://www.rns-pdf.londonstockexchange.com/rns/8399K_1-2023-8-30.pdf
Report to Shareholders Third Quarter 2023
Interim Condensed Consolidated
Financial Statements
(unaudited)
Consolidated Balance Sheets 56
Consolidated Statements of Income 57
Consolidated Statements of Comprehensive
Income 58
Consolidated Statements of Changes
in Equity 60
Consolidated Statements of Cash Flows 61
Notes to the Interim Condensed Consolidated
Financial Statements 62
Consolidated Balance Sheets
(unaudited) (millions of Canadian dollars)
As at July As at October
31, 2023 31, 2022
----------------------------------------------------- ----------- -------------
Assets
Cash and deposits with financial institutions 39,808 31,870
----------------------------------------------------- ----------- -------------
Securities (Notes 3, 4 and 5)
At fair value through profit or loss 106,569 87,375
At fair value through other comprehensive
income 9,117 8,828
At amortized cost 12,019 13,516
----------------------------------------------------- ----------- -------------
127,705 109,719
---------------------------------------------------- ----------- -------------
Securities purchased under reverse repurchase
agreements
and securities borrowed 12,368 26,486
------------------------------------------------------- ----------- -------------
Loans (Note 6)
Residential mortgage 84,776 80,129
Personal 45,793 45,323
Credit card 2,491 2,389
Business and government 80,784 73,317
----------------------------------------------------- ----------- -------------
213,844 201,158
Customers' liability under acceptances 6,709 6,541
Allowances for credit losses (1,120) (955)
----------------------------------------------------- ----------- -------------
219,433 206,744
---------------------------------------------------- ----------- -------------
Other
Derivative financial instruments 14,362 18,547
Investments in associates and joint ventures
(Notes 5 and 17) 45 140
Premises and equipment 1,553 1,397
Goodwill 1,514 1,519
Intangible assets 1,330 1,360
Other assets (Note 7) 7,897 5,958
----------------------------------------------------- ----------- -------------
26,701 28,921
---------------------------------------------------- ----------- -------------
426,015 403,740
---------------------------------------------------- ----------- -------------
Liabilities and equity
Deposits (Notes 4 and 8) 282,323 266,394
----------------------------------------------------- ----------- -------------
Other
Acceptances 6,709 6,541
Obligations related to securities sold short 22,825 21,817
Obligations related to securities sold under
repurchase agreements
and securities loaned 38,433 33,473
Derivative financial instruments 18,768 19,632
Liabilities related to transferred receivables
(Note 4) 26,130 26,277
Other liabilities (Note 9) 7,055 6,361
----------------------------------------------------- ----------- -------------
119,920 114,101
---------------------------------------------------- ----------- -------------
Subordinated debt (Note 10) 748 1,499
----------------------------------------------------- ----------- -------------
Equity
Equity attributable to the Bank's shareholders
and holders of
other equity instruments (Notes 11 and 13)
Preferred shares and other equity instruments 3,150 3,150
Common shares 3,294 3,196
Contributed surplus 56 56
Retained earnings 16,285 15,140
Accumulated other comprehensive income 237 202
----------------------------------------------------- ----------- -------------
23,022 21,744
Non-controlling interests 2 2
----------------------------------------------------- ----------- -------------
23,024 21,746
---------------------------------------------------- ----------- -------------
426,015 403,740
---------------------------------------------------- ----------- -------------
The accompanying notes are an integral part of these unaudited
interim condensed consolidated financial statements.
Consolidated Statements of Income
(unaudited) (millions of Canadian dollars)
Quarter ended Nine months ended
July 31 July 31
----------------------------------------------------- --------------- -------------------
2023 2022(1) 2023 2022(1)
----------------------------------------------------- ------ ------- -------- ---------
Interest income
Loans 3,266 1,845 9,195 4,736
Securities at fair value through profit or
loss 398 470 1,181 1,155
Securities at fair value through other comprehensive
income 79 47 206 109
Securities at amortized cost 127 58 358 156
Deposits with financial institutions 455 125 1,235 188
------------------------------------------------------ ------ ------- -------- ---------
4,325 2,545 12,175 6,344
----------------------------------------------------- ------ ------- -------- ---------
Interest expense
Deposits 2,597 870 7,058 1,705
Liabilities related to transferred receivables 166 119 465 325
Subordinated debt 11 5 36 13
Other 681 132 1,765 237
------------------------------------------------------ ------ ------- -------- ---------
3,455 1,126 9,324 2,280
----------------------------------------------------- ------ ------- -------- ---------
Net interest income (2) 870 1,419 2,851 4,064
------------------------------------------------------ ------ ------- -------- ---------
Non-interest income
Underwriting and advisory fees 77 68 277 230
Securities brokerage commissions 38 46 132 162
Mutual fund revenues 148 143 432 446
Investment management and trust service fees 254 244 743 753
Credit fees 147 121 417 365
Card revenues 56 48 153 139
Deposit and payment service charges 77 76 223 220
Trading revenues (losses) 632 71 1,813 314
Gains (losses) on non-trading securities, net 8 9 49 116
Insurance revenues, net 37 48 120 132
Foreign exchange revenues, other than trading 36 46 130 154
Share in the net income of associates and joint
ventures 2 4 9 24
Other (Note 17) 133 70 227 199
------------------------------------------------------ ------ ------- -------- ---------
1,645 994 4,725 3,254
----------------------------------------------------- ------ ------- -------- ---------
Total revenues 2,515 2,413 7,576 7,318
------------------------------------------------------ ------ ------- -------- ---------
Non-interest expenses
Compensation and employee benefits 851 828 2,559 2,453
Occupancy 85 77 251 229
Technology 248 225 755 688
Communications 14 14 43 44
Professional fees 63 61 188 181
Other (Note 17) 156 100 398 289
------------------------------------------------------ ------ ------- -------- ---------
1,417 1,305 4,194 3,884
----------------------------------------------------- ------ ------- -------- ---------
Income before provisions for credit losses
and income taxes 1,098 1,108 3,382 3,434
Provisions for credit losses (Note 6) 111 57 282 58
------------------------------------------------------ ------ ------- -------- ---------
Income before income taxes 987 1,051 3,100 3,376
Income taxes (Note 15) 148 225 533 731
------------------------------------------------------ ------ ------- -------- ---------
Net income 839 826 2,567 2,645
------------------------------------------------------ ------ ------- -------- ---------
Net income attributable to
Preferred shareholders and holders of other
equity instruments 36 26 106 77
Common shareholders 804 800 2,463 2,569
------------------------------------------------------ ------ ------- -------- ---------
Bank shareholders and holders of other equity
instruments 840 826 2,569 2,646
Non-controlling interests (1) - (2) (1)
------------------------------------------------------ ------ ------- -------- ---------
839 826 2,567 2,645
----------------------------------------------------- ------ ------- -------- ---------
Earnings per share (dollars) (Note 16)
Basic 2.38 2.38 7.30 7.61
Diluted 2.36 2.35 7.23 7.53
Dividends per common share (dollars) (Note
11) 1.02 0.92 2.96 2.66
------------------------------------------------------ ------ ------- -------- ---------
The accompanying notes are an integral part of these unaudited
interim condensed consolidated financial statements.
(1) For the quarter and nine-month period ended July 31, 2022,
certain amounts have been adjusted to reflect a change in
accounting policy related to cloud computing arrangements. For
additional information, see Note 1.
(2) Net interest income includes dividend income. For additional
information, see Note 1 to the audited annual consolidated
financial statements for the year ended October 31, 2022.
Consolidated Statements of Comprehensive Income
(unaudited) (millions of Canadian dollars)
Quarter ended Nine months
July 31 ended July 31
--------------------------------------------------- ---------------- ----------------
2023 2022(1) 2023 2022(1)
------------------------------------------------------- ------ ------- ------ --------
Net income 839 826 2,567 2,645
------------------------------------------------------- ------ ------- ------ --------
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 (177) (15) (208) 149
Impact of hedging net foreign currency translation
gains (losses) 53 10 59 (41)
(124) (5) (149) 108
----------------------------------------------------- ------ ------- ------ --------
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 (7) (56) (35) (176)
Net (gains) losses on debt securities at fair
value through other comprehensive
income reclassified to net income 8 37 60 81
Change in allowances for credit losses on
debt securities at fair value through
other comprehensive income reclassified to
net income 1 - 1 -
--------------------------------------------------- ------ ------- ------ --------
2 (19) 26 (95)
--------------------------------------------------- ------ ------- ------ --------
Net change in cash flow hedges
Net gains (losses) on derivative financial
instruments designated as cash flow hedges 145 (9) 125 25
Net (gains) losses on designated derivative
financial instruments reclassified
to net income 7 7 32 23
---------------------------------------------------- ------ ------- ------ --------
152 (2) 157 48
--------------------------------------------------- ------ ------- ------ --------
Share in the other comprehensive income of
associates and joint ventures - (1) 1 (2)
----------------------------------------------------- ------ ------- ------ --------
Items that will not be subsequently reclassified
to net income
Remeasurements of pension plans and other
post-employment benefit plans (40) (41) (96) 131
Net gains (losses) on equity securities designated
at fair value through
other comprehensive income (1) (9) 5 (26)
Net fair value change attributable to the
credit risk on financial liabilities
designated at fair value through profit or
loss (77) 266 (235) 591
---------------------------------------------------- ------ ------- ------ --------
(118) 216 (326) 696
--------------------------------------------------- ------ ------- ------ --------
Total other comprehensive income, net of income
taxes (88) 189 (291) 755
------------------------------------------------------- ------ ------- ------ --------
Comprehensive income 751 1,015 2,276 3,400
------------------------------------------------------- ------ ------- ------ --------
Comprehensive income attributable to
Bank shareholders and holders of other equity
instruments 752 1,015 2,278 3,401
Non-controlling interests (1) - (2) (1)
------------------------------------------------------ ------ ------- ------ --------
751 1,015 2,276 3,400
------------------------------------------------------ ------ ------- ------ --------
The accompanying notes are an integral part of these
unaudited interim condensed consolidated financial
statements.
(1) For the quarter and nine-month period ended July 31, 2022 ,
certain amounts have been adjusted to reflect a change in
accounting policy related to cloud computing arrangements. For
additional information, see Note 1.
Consolidated Statements of Comprehensive Income (cont.)
(unaudited) (millions of Canadian dollars)
Income Taxes - Other Comprehensive Income
The following table presents the income tax expense or recovery
for each component of other comprehensive income.
Nine months ended
Quarter ended July 31 July 31
-------------------------------------------------------------------- -------------------
2023 2022 2023 2022
---------------------------------------------------------- ---- ---- ---------- -------
Items that may be subsequently reclassified
to net income
Net foreign currency translation adjustments
Net unrealized foreign currency translation
gains (losses) on investments
in foreign operations 5 1 7 (4)
Impact of hedging net foreign currency translation
gains (losses) 13 (4) 13 (9)
--------------------------------------------------------- ---- ---- ---------- -------
18 (3) 20 (13)
------------------------------------------------------- ---- ---- ---------- -------
Net change in debt securities at fair value
through other comprehensive income
Net unrealized gains (losses) on debt securities
at fair value through other
comprehensive income (3) (20) (14) (63)
Net (gains) losses on debt securities at fair
value through other comprehensive income
reclassified to net income 3 13 23 29
Change in allowances for credit losses on debt
securities at fair value through
other comprehensive income reclassified to
net income - - - -
-------------------------------------------------------- ---- ---- ---------- -------
- (7) 9 (34)
------------------------------------------------------- ---- ---- ---------- -------
Net change in cash flow hedges
Net gains (losses) on derivative financial
instruments designated as cash flow hedges 56 (3) 48 9
Net (gains) losses on designated derivative
financial instruments reclassified
to net income 3 3 13 8
--------------------------------------------------------- ---- ---- ---------- -------
59 - 61 17
------------------------------------------------------- ---- ---- ---------- -------
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 (15) (15) (27) 47
Net gains (losses) on equity securities designated
at fair value through
other comprehensive income - (3) 2 (9)
Net fair value change attributable to the
credit risk on financial liabilities
designated at fair value through profit or
loss (30) 96 (91) 212
--------------------------------------------------------- ---- ---- ---------- -------
(45) 78 (116) 250
---- ---- ---------- -------
32 68 (26) 219
---------------------------------------------------------- ---- ---- ---------- -------
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)
Nine months ended July
31
----------------------------------------------------------- ---------------------------
2023 2022(1)
------------------------------------------------------------ ----------- -----------
Preferred shares and other equity instruments at
beginning and at end (Note 11) 3,150 2,650
------------------------------------------------------------ ----------- -----------
Common shares at beginning (Note 11) 3,196 3,160
Issuances of common shares pursuant to the Stock
Option Plan 86 54
Repurchases of common shares for cancellation - (24)
Impact of shares purchased or sold for trading 12 (1)
Common shares at end 3,294 3,189
------------------------------------------------------------ ----------- -----------
Contributed surplus at beginning 56 47
Stock option expense (Note 13) 14 12
Stock options exercised (9) (6)
Other (5) 2
------------------------------------------------------------ ----------- -----------
Contributed surplus at end 56 55
------------------------------------------------------------ ----------- -----------
Retained earnings at beginning 15,140 12,854
Net income attributable to the Bank's shareholders
and holders of other equity instruments 2,569 2,646
Dividends on preferred shares and distributions on
other equity instruments (Note 11) (122) (85)
Dividends on common shares (Note 11) (999) (897)
Premium paid on common shares repurchased for cancellation
(Note 11) - (221)
Remeasurements of pension plans and other post-employment
benefit plans (96) 131
Net gains (losses) on equity securities designated
at fair value through other comprehensive income 5 (26)
Net fair value change attributable to the credit
risk on financial liabilities
designated at fair value through profit or loss (235) 591
Impact of a financial liability resulting from put
options written to non-controlling interests 6 (7)
Other 17 8
------------------------------------------------------------ ----------- -----------
Retained earnings at end 16,285 14,994
------------------------------------------------------------ ----------- -----------
Accumulated other comprehensive income at beginning 202 (32)
Net foreign currency translation adjustments (149) 108
Net change in unrealized gains (losses) on debt securities
at fair value through other comprehensive income 26 (95)
Net change in gains (losses) on cash flow hedges 157 48
Share in the other comprehensive income of associates
and joint ventures 1 (2)
------------------------------------------------------------ ----------- -----------
Accumulated other comprehensive income at end 237 27
------------------------------------------------------------ ----------- -----------
-
Equity attributable to the Bank's shareholders and
holders of other equity instruments 23,022 20,915
------------------------------------------------------------ ----------- -----------
Non-controlling interests at beginning 2 3
Net income attributable to non-controlling interests (2) (1)
Other 2 -
Non-controlling interests at end 2 2
------------------------------------------------------------ ----------- -----------
Equity 23,024 20,917
------------------------------------------------------------ ----------- -----------
Accumulated Other Comprehensive Income
As at July As at July
31, 2023 31, 2022
---------------------------------------------------------------- ---------- ----------
Accumulated other comprehensive income
Net foreign currency translation adjustments 55 (21)
Net unrealized gains (losses) on debt securities at
fair value through other comprehensive income (8) (24)
Net gains (losses) on instruments designated as cash
flow hedges 188 71
Share in the other comprehensive income of associates
and joint ventures 2 1
----------------------------------------------------------------- ---------- ----------
237 27
---------------------------------------------------------------- ---------- ----------
The accompanying notes are an integral part of these
unaudited interim condensed consolidated financial statements.
(1) For the nine-month period ended July 31, 2022 , certain
amounts have been adjusted to reflect a change in accounting policy
related to cloud computing arrangements. For additional
information, see Note 1.
Consolidated Statements of Cash Flows
(unaudited) (millions of Canadian dollars)
Nine months ended
July 31
--------------------------------------------------------------- -------------------
2023 2022(1)
----------------------------------------------------------------- --------- --------
Cash flows from operating activities
Net income 2,567 2,645
Adjustments for
Provisions for credit losses 282 58
Amortization of premises and equipment, including right-of-use
assets 158 151
Amortization of intangible assets 234 212
Deferred taxes (75) 96
Losses (gains) on sales of non-trading securities,
net (49) (116)
Share in the net income of associates and joint ventures (9) (24)
Stock option expense 14 12
Gain on the fair value remeasurement of an equity interest (91) -
Change in operating assets and liabilities
Securities at fair value through profit or loss (19,194) 1,160
Securities purchased under reverse repurchase agreements
and securities borrowed 14,118 (9,307)
Loans and acceptances, net of securitization (12,950) (18,862)
Deposits 15,929 16,252
Obligations related to securities sold short 1,008 3,065
Obligations related to securities sold under repurchase
agreements and securities loaned 4,960 12,845
Derivative financial instruments, net 3,321 (795)
Securitization - Credit cards (29) (37)
Interest and dividends receivable and interest payable 280 (50)
Current tax assets and liabilities (295) (321)
Other items (787) (1,551)
---------------------------------------------------------------- --------- --------
9,392 5,433
--------------------------------------------------------------- --------- --------
Cash flows from financing activities
Issuances of common shares (including the impact of
shares purchased for trading) 89 47
Repurchases of common shares for cancellation - (245)
Issuance of subordinated debt - 748
Redemption of subordinated debt (750) -
Repayments of lease liabilities (76) (73)
Dividends paid on shares and distributions on other
equity instruments (1,117) (982)
(1,854) (505)
--------------------------------------------------------------- --------- --------
Cash flows from investing activities
Net change in investments in associates and joint ventures - 202
Purchases of non-trading securities (6,360) (8,479)
Maturities of non-trading securities 3,548 1,594
Sales of non-trading securities 3,896 5,643
Net change in premises and equipment, excluding right-of-use
assets (270) (227)
Net change in intangible assets (204) (273)
----------------------------------------------------------------- --------- --------
610 (1,540)
--------------------------------------------------------------- --------- --------
Impact of currency rate movements on cash and cash
equivalents (210) 701
------------------------------------------------------------------ --------- --------
Increase (decrease) in cash and cash equivalents 7,938 4,089
Cash and cash equivalents at beginning 31,870 33,879
----------------------------------------------------------------- --------- --------
Cash and cash equivalents at end (2) 39,808 37,968
----------------------------------------------------------------- --------- --------
Supplementary information about cash flows from operating
activities
Interest paid 8,643 2,059
Interest and dividends received 11,773 6,073
Income taxes paid 573 911
----------------------------------------------------------------- --------- --------
The accompanying notes are an integral part of these unaudited interim
condensed consolidated financial statements.
(1) For the nine-month period ended July 31, 2022, certain
amounts have been adjusted to reflect a change in accounting policy
related to cloud computing arrangements. For additional
information, see Note 1.
(2) This item is the equivalent of Consolidated Balance Sheet
item Cash and deposits with financial institutions. It includes an
amount of $8.2 billion as at July 31, 2023 ($7.7 billion as at
October 31, 2022) for which there are restrictions and of which
$5.5 billion ($5.3 billion as at October 31, 2022) represent the
balances that the Bank must maintain with central banks, other
regulatory agencies, and certain counterparties.
Notes to the Interim Condensed Consolidated Financial
Statements
(unaudited) (millions of Canadian dollars)
Note Note
1 Basis of Presentation 62 10 Subordinated Debt 83
Note Note Share Capital and Other Equity
2 Accounting Policy Changes 62 11 Instruments 83
Note Note
3 Fair Value of Financial Instruments 63 12 Capital Disclosure 85
Note Financial Instruments Designated Note
4 at Fair Value Through 13 Share-Based Payments 86
Note Employee Benefits - Pension
Profit or Loss 68 14 Plans and Other
Note
5 Securities 69 Post-Employment Benefit Plans 87
Note Loans and Allowances for Credit Note
6 Losses 70 15 Income Taxes 88
Note Note
7 Other Assets 82 16 Earnings Per Share 89
Note Note
8 Deposits 82 17 Segment Disclosures 90
Note
9 Other Liabilities 83
Note 1 - Basis of Presentation
On August 29, 2023, the Board of Directors authorized the
publication of the Bank's unaudited interim condensed consolidated
financial statements (the consolidated financial statements) for
the quarter and nine-month period ended July 31, 2023.
The Bank's consolidated financial statements are prepared in
accordance with International Financial Reporting Standards (IFRS),
as issued by the International Accounting Standards Board (IASB).
The financial statements also comply with section 308(4) of the
Bank Act (Canada), which states that, except as otherwise specified
by the Office of the Superintendent of Financial Institutions
(Canada) (OSFI), the consolidated financial statements are to be
prepared in accordance with IFRS. IFRS represent Canadian generally
accepted accounting principles (GAAP). None of the OSFI accounting
requirements are exceptions to IFRS.
These consolidated financial statements were prepared in
accordance with IAS 34 - Interim Financial Reporting and using the
same accounting policies as those described in Note 1 to the
audited annual consolidated financial statements for the year ended
October 31, 2022. Since these interim consolidated financial
statements do not include all of the annual financial statement
disclosures required under IFRS, they should be read in conjunction
with the audited annual consolidated financial statements and
accompanying notes for the year ended October 31, 2022. Future
accounting policy changes that have not yet come into effect are
described in Note 2 to the audited annual consolidated financial
statements for the year ended October 31, 2022.
Certain comparative amounts have been adjusted to reflect an
accounting policy change related to cloud computing arrangements,
as described in Note 1 to the audited annual consolidated financial
statements for the year ended October 31, 2022.
Judgment, Estimates and Assumptions
In preparing consolidated financial statements in accordance
with IFRS, management must exercise judgment and make estimates and
assumptions that affect the reporting date carrying amounts of
assets and liabilities, net income, and related information. Some
of the Bank's accounting policies, such as measurement of expected
credit losses (ECLs), require particularly complex judgments and
estimates. See Note 1 to the audited annual consolidated financial
statements for the year ended October 31, 2022 for a summary of the
most significant estimation processes used to prepare the
consolidated financial statements in accordance with IFRS and for
the valuation techniques used to determine the carrying values and
fair values of assets and liabilities.
The geopolitical landscape, rising inflation, higher interest
rates, and the Russia-Ukraine war continue to create uncertainty.
As a result, establishing reliable estimates and applying judgment
continue to be substantially complex. The uncertainty regarding
certain key inputs used in measuring ECLs is described in Note 6 to
these unaudited interim condensed consolidated financial
statements.
Unless otherwise indicated, all amounts are expressed in
Canadian dollars, which is the Bank's functional and presentation
currency.
Note 2 - Accounting Policy Changes
Amendments to IAS 12 - Income Taxes
On May 23, 2023, the IASB issued International Tax Reform -
Pillar Two Model Rules, which amends IAS 12 - Income Taxes. These
amendments apply to income taxes arising from tax law enacted or
substantively enacted to implement the OECD Pillar Two model rules.
The amendments also introduce a temporary exception to the
accounting of deferred tax assets and liabilities arising from the
implementation of these rules as well as related disclosures. These
amendments apply immediately upon issuance and retrospectively in
accordance with IAS 8 - Accounting Policies, Changes in Accounting
Estimates and Errors. Additional disclosures of current tax expense
(recovery) and other information related to income tax exposures
will be provided for annual periods beginning on or after November
1, 2023. These amendments have no current impact on the Bank's
consolidated results.
Note 3 - Fair Value of Financial Instruments
Fair Value and Carrying Value of Financial Instruments by
Category
Financial assets and financial liabilities are recognized on the
Consolidated Balance Sheet at fair value or at amortized cost in
accordance with the categories set out in the accounting framework
for financial instruments.
As at July 31,
2023
---------------- ----------- ----------- ------------- ------------- ----------- ------------------------------
Carrying value Carrying Fair
and fair value value value
------------- ------------------------------------------------------ ----------- ----------- -------- -------
Debt Equity
Financial Financial securities securities
instruments instruments classified designated
classified designated as at at Financial Financial
as at at fair fair value fair value instruments instruments
fair value value through through at at
through through other other amortized amortized Total Total
profit profit comprehensive comprehensive cost, cost, carrying fair
or loss or loss income income net net value value
------------- ----------- ----------- ------------- ------------- ----------- ----------- -------- -------
Financial assets
Cash and
deposits
with financial
institutions - - - - 39,808 39,808 39,808 39,808
Securities 105,749 820 8,545 572 12,019 11,581 127,705 127,267
Securities
purchased
under reverse
repurchase
agreements
and securities
borrowed - 39 - - 12,329 12,329 12,368 12,368
Loans and
acceptances,
net of
allowances 12,862 - - - 206,571 204,188 219,433 217,050
Other
Derivative
financial
instruments 14,362 - - - - - 14,362 14,362
Other assets 73 - - - 4,469 4,469 4,542 4,542
--------------- ----------- ----------- ------------- ------------- ----------- ----------- -------- -------
Financial
liabilities
Deposits (1) - 18,788 263,535 262,942 282,323 281,730
Other
Acceptances - - 6,709 6,709 6,709 6,709
Obligations
related
to securities
sold
short 22,825 - - - 22,825 22,825
Obligations
related
to securities
sold
under
repurchase
agreements
and
securities
loaned - - 38,433 38,433 38,433 38,433
Derivative
financial
instruments 18,768 - - - 18,768 18,768
Liabilities
related
to transferred
receivables - 10,072 16,058 15,335 26,130 25,407
Other
liabilities - - 3,315 3,312 3,315 3,312
Subordinated
debt - - 748 737 748 737
--------------- ----------- ----------- ------------- ------------- ----------- ----------- -------- -------
(1) Includes embedded derivative financial instruments.
Note 3 - Fair Value of Financial Instruments (cont.)
As at October 31,
2022
---------------- ----------- ----------- ------------- ------------- ----------- ------------------------------
Carrying value and Carrying Fair
fair value value value
------------- ------------------------------------------------------ ----------- ----------- -------- -------
Debt Equity
Financial Financial securities securities
instruments instruments classified designated
classified designated as at at Financial Financial
as at at fair fair value fair value instruments instruments
fair value value through through at at
through through other other amortized amortized Total Total
profit profit comprehensive comprehensive cost, cost, carrying fair
or loss or loss income income net net value value
------------- ----------- ----------- ------------- ------------- ----------- ----------- -------- -------
Financial assets
Cash and
deposits
with financial
institutions - - - - 31,870 31,870 31,870 31,870
Securities 86,338 1,037 8,272 556 13,516 13,007 109,719 109,210
Securities
purchased
under reverse
repurchase
agreements
and securities
borrowed - - - - 26,486 26,486 26,486 26,486
Loans and
acceptances,
net of
allowances 10,516 - - - 196,228 190,955 206,744 201,471
Other
Derivative
financial
instruments 18,547 - - - - - 18,547 18,547
Other assets 87 - - - 3,221 3,221 3,308 3,308
--------------- ----------- ----------- ------------- ------------- ----------- ----------- -------- -------
Financial
liabilities
Deposits (1) - 15,355 251,039 249,937 266,394 265,292
Other
Acceptances - - 6,541 6,541 6,541 6,541
Obligations
related
to securities
sold
short 21,817 - - - 21,817 21,817
Obligations
related
to securities
sold
under
repurchase
agreements
and
securities
loaned - - 33,473 33,473 33,473 33,473
Derivative
financial
instruments 19,632 - - - 19,632 19,632
Liabilities
related
to transferred
receivables - 11,352 14,925 14,137 26,277 25,489
Other
liabilities - - 2,632 2,627 2,632 2,627
Subordinated
debt - - 1,499 1,478 1,499 1,478
--------------- ----------- ----------- ------------- ------------- ----------- ----------- -------- -------
(1) Includes embedded derivative financial instruments .
Establishing Fair Value
The fair value of a financial instrument is the price that would
be received to sell a financial asset or paid to transfer a
financial liability in an orderly transaction in the principal
market at the measurement date under current market conditions
(i.e., an exit price).
Unadjusted quoted prices in active markets provide the best
evidence of fair value. When there is no quoted price in an active
market, the Bank applies other valuation techniques that maximize
the use of relevant observable inputs and that minimize the use of
unobservable inputs. Such valuation techniques include the
following: using information available from recent market
transactions, referring to the current fair value of a comparable
financial instrument, applying discounted cash flow analysis,
applying option pricing models, or relying on any other valuation
technique that is commonly used by market participants and has
proven to yield reliable estimates. Judgment is required when
applying many of the valuation techniques. The Bank's valuations
were based on its assessment of the conditions prevailing as at
July 31, 2023 and may change in the future. Furthermore, there may
be measurement uncertainty resulting from the choice of valuation
model used.
Fair value is established in accordance with a rigorous control
framework. The Bank has policies and procedures that govern the
process for determining fair value. The Bank's valuation governance
structure has remained largely unchanged from that described in
Note 3 to the audited annual consolidated financial statements for
the year ended October 31, 2022. The valuation techniques used to
determine the fair value of financial assets and financial
liabilities are also described in this note, and no significant
changes have been made to the valuation techniques.
Financial Instruments Recorded at Fair Value on the Consolidated
Balance Sheet
Hierarchy of Fair Value Measurements
IFRS establishes a fair value measurement hierarchy that
classifies the inputs used in financial instrument fair value
measurement techniques according to three levels. This fair value
hierarchy requires observable market inputs in an active market to
be used whenever such inputs exist. According to the hierarchy, the
highest level of inputs are unadjusted quoted prices in active
markets for identical instruments and the lowest level of inputs
are unobservable inputs. If inputs from different levels of the
hierarchy are used, the financial instrument is classified in the
same level as the lowest level input that is significant to the
fair value measurement. For additional information, see Note 3 to
the audited annual consolidated financial statements for the year
ended October 31, 2022.
Transfers of financial instruments between Levels 1 and 2 and
transfers to (or from) Level 3 are deemed to have taken place at
the beginning of the quarter in which the transfer occurred.
Significant transfers can occur between the fair value hierarchy
levels due to new information on inputs used to determine fair
value and the observable nature of those inputs.
During the quarter ended July 31, 2023, $2 million in securities
classified as at fair value through profit or loss and $3 million
in obligations related to securities sold short were transferred
from Level 2 to Level 1 as a result of changing market conditions
($4 million in securities classified as at fair value through
profit or loss during the quarter ended July 31, 2022). Also,
during the quarter ended July 31, 2023, $6 million in securities
classified as at fair value through profit or loss were transferred
from Level 1 to Level 2 as a result of changing market conditions
($16 million in securities classified as at fair value through
profit or loss during the quarter ended July 31, 2022). D uring the
nine-month periods ended July 31, 2023 and 2022, financial
instruments were transferred to (or from) Level 3 due to changes in
the availability of observable market inputs as a result of
changing market conditions.
The following tables show financial instruments recorded at fair
value on the Consolidated Balance Sheet according to the fair value
hierarchy.
As at July 31, 2023
----------------------------------------------- ------ ----------------------------------
Total
financial
assets/liabilities
Level Level Level at fair
1 2 3 value
----------------------------------------------- ------ ------ ----- -------------------
Financial assets
Securities
At fair value through profit or loss
Securities issued or guaranteed by
Canadian government 6,177 11,241 - 17,418
Canadian provincial and municipal governments - 8,817 - 8,817
U.S. Treasury, other U.S. agencies and
other foreign governments 3,058 2,179 - 5,237
Other debt securities - 4,254 81 4,335
Equity securities 69,803 543 416 70,762
------------------------------------------------ ------ ------ ----- -------------------
79,038 27,034 497 106,569
----------------------------------------------- ------ ------ ----- -------------------
At fair value through other comprehensive
income
Securities issued or guaranteed by
Canadian government 78 3,830 - 3,908
Canadian provincial and municipal governments - 2,238 - 2,238
U.S. Treasury, other U.S. agencies and
other foreign governments 765 251 - 1,016
Other debt securities - 1,383 - 1,383
Equity securities - 247 325 572
------------------------------------------------ ------ ------ ----- -------------------
843 7,949 325 9,117
----------------------------------------------- ------ ------ ----- -------------------
Securities purchased under reverse repurchase
agreements and
securities borrowed - 39 - 39
Loans - 12,650 212 12,862
Other
Derivative financial instruments 241 14,106 15 14,362
Other assets - Other items - - 73 73
------------------------------------------------- ------ ------ ----- -------------------
80,122 61,778 1,122 143,022
--------------------------------------------------- ------ ------ ----- -------------------
Financial liabilities
Deposits (1) - 18,852 - 18,852
Other
Obligations related to securities sold
short 17,161 5,664 - 22,825
Derivative financial instruments 453 18,291 24 18,768
Liabilities related to transferred receivables - 10,072 - 10,072
17,614 52,879 24 70,517
--------------------------------------------------- ------ ------ ----- -------------------
(1) The amounts include the fair value of embedded derivative
financial instruments in deposits.
Note 3 - Fair Value of Financial Instruments (cont.)
As at October 31, 2022
----------------------------------------------- ------- -------------------------------------
Total financial
assets/liabilities
at fair
Level 1 Level 2 Level 3 value
----------------------------------------------- ------- ------- ------- -------------------
Financial assets
Securities
At fair value through profit or loss
Securities issued or guaranteed by
Canadian government 4,736 8,186 - 12,922
Canadian provincial and municipal governments - 9,260 - 9,260
U.S. Treasury, other U.S. agencies and
other foreign governments 10,639 4,445 - 15,084
Other debt securities - 3,324 60 3,384
Equity securities 45,805 504 416 46,725
------------------------------------------------ ------- ------- ------- -------------------
61,180 25,719 476 87,375
----------------------------------------------- ------- ------- ------- -------------------
At fair value through other comprehensive
income
Securities issued or guaranteed by
Canadian government 21 3,191 - 3,212
Canadian provincial and municipal governments - 1,970 - 1,970
U.S. Treasury, other U.S. agencies and
other foreign governments 1,687 191 - 1,878
Other debt securities - 1,212 - 1,212
Equity securities - 236 320 556
------------------------------------------------ ------- ------- ------- -------------------
1,708 6,800 320 8,828
----------------------------------------------- ------- ------- ------- -------------------
Loans - 10,272 244 10,516
Other
Derivative financial instruments 342 18,204 1 18,547
Other assets - Other items - - 87 87
------------------------------------------------- ------- ------- ------- -------------------
63,230 60,995 1,128 125,353
------------------------------------------------ ------- ------- ------- -------------------
Financial liabilities
Deposits (1) - 15,424 8 15,432
Other
Obligations related to securities sold
short 15,213 6,604 - 21,817
Derivative financial instruments 625 18,989 18 19,632
Liabilities related to transferred receivables - 11,352 - 11,352
15,838 52,369 26 68,233
------------------------------------------------ ------- ------- ------- -------------------
(1) The amounts include the fair value of embedded derivative
financial instruments in deposits.
Financial Instruments Classified in Level 3
The Bank classifies financial instruments in Level 3 when the
valuation technique is based on at least one significant input that
is not observable in the markets. The Bank maximizes the use of
observable inputs to determine the fair value of financial
instruments.
For a description of the valuation techniques and significant
unobservable inputs used in determining the fair value of financial
instruments classified in Level 3, see Note 3 to the audited annual
consolidated financial statements for the year ended October 31,
2022. For the quarter and nine-month period ended July 31, 2023, no
significant change was made to the valuation techniques and
significant unobservable inputs used in determining fair value.
Sensitivity Analysis of Financial Instruments Classified in
Level 3
The Bank performs sensitivity analyses for the fair value
measurements of Level 3 financial instruments, substituting
unobservable inputs with one or more reasonably possible
alternative assumptions. For additional information on how a change
in an unobservable input might affect the fair value measurements
of Level 3 financial instruments, see Note 3 to the audited annual
consolidated financial statements for the year ended October 31,
2022. For the nine-month period ended July 31, 2023, there were no
significant changes in the sensitivity analyses of Level 3
financial instruments .
Change in the Fair Value of Financial Instruments Classified in
Level 3
The Bank may hedge the fair value of financial instruments
classified in the various levels through offsetting hedge
positions. Gains and losses on financial instruments classified in
Level 3 presented in the following tables do not reflect the
inverse gains and losses on financial instruments used for economic
hedging purposes that may have been classified in Level 1 or Level
2 by the Bank. In addition, the Bank may hedge the fair value of
financial instruments classified in Level 3 using other financial
instruments classified in Level 3. The effect of these hedges is
not included in the net amount presented in the following tables. T
he gains and losses presented hereafter may comprise changes in
fair value based on observable and unobservable inputs.
Nine months ended
July 31, 2023
--------------------------------------- ---------- -------------- ------- ----------------------
Securities
Securities at fair
at fair value
value through Loans Derivative
through other and financial
profit comprehensive other instruments Deposits
or loss income assets (1) (2)
-------------------------------------- ---------- -------------- ------- ------------ --------
Fair value as at October 31, 2022 476 320 331 (17) (8)
Total realized and unrealized gains
(losses) included in Net income
(3) (14) - - (1) -
Total realized and unrealized gains
(losses) included in
Other comprehensive income - 5 - - -
Purchases 54 - - - -
Sales (19) - - - -
Issuances - - 17 - -
Settlements and other - - (63) 5 -
Financial instruments transferred
into Level 3 - - - 2
Financial instruments transferred
out of Level 3 - - - 2 8
--------------------------------------- ---------- -------------- ------- ------------ --------
Fair value as at July 31, 2023 497 325 285 (9) -
--------------------------------------- ---------- -------------- ------- ------------ --------
Change in unrealized gains and losses
included in Net income with respect
to financial assets and financial
liabilities held as at July 31,
2023(4) 22 - - (1) -
--------------------------------------- ---------- -------------- ------- ------------ --------
Nine months ended
July 31, 2022
------------------------------------ ---------- -------------- ------- ----------------------------
Securities
Securities at fair
at fair value
value through Loans
through other and Derivative
profit comprehensive other financial
or loss income assets instruments(1) Deposits(2)
----------------------------------- ---------- -------------- ------- --------------- -----------
Fair value as at October 31, 2021 471 306 297 2 -
Total realized and unrealized gains
(losses) included in Net income
(5) 5 - (27) (1) 2
Total realized and unrealized gains
(losses) included in
Other comprehensive income - (1) - - -
Purchases 43 7 71 - -
Sales (62) - - - -
Issuances - - 16 - (3)
Settlements and other - - (14) - -
Financial instruments transferred
into Level 3 - - - 1 (3)
Financial instruments transferred
out of Level 3 (12) - - - -
------------------------------------ ---------- -------------- ------- --------------- -----------
Fair value as at July 31, 2022 445 312 343 2 (4)
------------------------------------ ---------- -------------- ------- --------------- -----------
Change in unrealized gains and
losses
included in Net income with respect
to financial assets and financial
liabilities held as at July 31,
2022(6) (12) - (27) (1) 2
------------------------------------ ---------- -------------- ------- --------------- -----------
(1) The derivative financial instruments include assets and
liabilities presented on a net basis.
(2) The amounts include the fair value of embedded derivative
financial instruments in deposits.
(3) Total gains (losses) included in Non-interest income was a loss of $15 million.
(4) Total unrealized gains (losses) included in Non-interest
income was an unrealized gain of $21 million.
(5) Total gains (losses) included in Non-interest income was a loss of $21 million.
(6) Total unrealized gains (losses) included in Non-interest
income was an unrealized loss of $38 million.
Note 4 - Financial Instruments Designated at Fair Value Through
Profit or Loss
The Bank chose to designate certain financial instruments at
fair value through profit or loss according to the criteria
presented in Note 1 to the audited annual consolidated financial
statements for the year ended October 31, 2022. Consistent with its
risk management strategy and in accordance with the fair value
option, which permits the designation if it eliminates or
significantly reduces a measurement or recognition inconsistency
that would otherwise arise from measuring financial assets and
financial liabilities or recognizing the gains and losses thereon
on different bases, the Bank designated certain securities, certain
securities purchased under reverse repurchase agreements, and
certain liabilities related to transferred receivables at fair
value through profit or loss. The fair value of liabilities related
to transferred receivables does not include credit risk, as the
holders of these liabilities are not exposed to the Bank's credit
risk. The Bank also designated certain deposits that include
embedded derivative financial instruments at fair value through
profit or loss.
To determine a change in fair value arising from a change in the
credit risk of deposits designated at fair value through profit or
loss, the Bank calculates, at the beginning of the period, the
present value of the instrument's contractual cash flows using the
following rates: first, an observed discount rate for similar
securities that reflects the Bank's credit spread and, then, a rate
that excludes the Bank's credit spread. The difference obtained
between the two values is then compared to the difference obtained
using the same rates at the end of the period.
Information about the financial assets and financial liabilities
designated at fair value through profit or loss is provided in the
following tables.
Unrealized Unrealized
gains gains Unrealized
(losses) (losses) gains
for for (losses)
Carrying the the nine since
value as quarter months the initial
at ended ended recognition
July 31, July 31, July 31, of the
2023 2023 2023 instrument
------------------------------------- --------- ---------- ---------- -----------
Financial assets designated at fair
value through profit or loss
Securities 820 (16) (6) (13)
Securities purchased under reverse
repurchase agreements 39 - - -
----------------------------------- --------- ---------- ---------- -----------
859 (16) (6) (13)
------------------------------------- --------- ---------- ---------- -----------
Financial liabilities designated
at fair value through profit or loss
Deposits(1)(2) 18,788 (108) (1,123) 1,959
Liabilities related to transferred
receivables 10,072 166 66 566
----------------------------------- --------- ---------- ---------- -----------
(.) 28,860 58 (1,057) 2,525
------------------------------------- --------- ---------- ---------- -----------
Unrealized
Unrealized gains Unrealized
gains (losses) gains
(losses) for (losses)
Carrying for the nine since
value as the quarter months the initial
at ended ended recognition
July 31, July 31, July 31, of the
2022 2022 2022 instrument
------------------------------------ ---------- ----------- ----------- ------------
Financial assets designated at fair
value through profit or loss
Securities 1,071 10 (18) -
Financial liabilities designated
at fair value through profit or loss
Deposits(1)(2) 14,803 322 2,063 2,130
Liabilities related to transferred
receivables 10,495 9 330 355
----------------------------------- ---------- ----------- ----------- ------------
25,298 331 2,393 2,485
------------------------------------ ---------- ----------- ----------- ------------
(1) For the quarter ended July 31, 2023, the change in the fair
value of deposits designated at fair value through profit or loss
attributable to credit risk, and recorded in Other comprehensive
income, resulted in a loss of $107 million ($362 million gain for
the quarter ended July 31, 2022). For the nine -month period ended
July 31, 2023, this change resulted in a loss of $326 million ($
803 million gain for the nine- month period ended July 31,
2022).
(2) The amount at maturity that the Bank will be contractually
required to pay to the holders of these deposits varies and will
differ from the reporting date fair value.
Note 5 - Securities
Credit Quality
As at July 31, 2023 and as at October 31, 2022, securities at
fair value through other comprehensive income and securities at
amortized cost were mainly classified in Stage 1, with their credit
quality falling mostly in the "Excellent" category according to the
Bank's internal risk-rating categories. For additional information
on the reconciliation of allowances for credit losses, see Note 6
to these consolidated financial statements.
Unrealized Gross Gains (Losses) on Securities at Fair Value
Through Other Comprehensive Income
As at July 31, 2023
----------------------------------------------- ---------------------------------------------
Gross Gross Carrying
Amortized unrealized unrealized value
cost gains losses (1)
---------------------------------------------- --------- ----------- ----------- --------
Securities issued or guaranteed by
Canadian government 4,107 1 (200) 3,908
Canadian provincial and municipal governments 2,384 2 (148) 2,238
U.S. Treasury, other U.S. agencies and
other foreign governments 1,077 - (61) 1,016
Other debt securities 1,492 - (109) 1,383
Equity securities 578 16 (22) 572
----------------------------------------------- --------- ----------- ----------- --------
9,638 19 (540) 9,117
----------------------------------------------- --------- ----------- ----------- --------
As at October 31, 2022
----------------------------------------------- --------------------------------------------------------
Amortized Gross unrealized Gross unrealized Carrying
cost gains losses value(1)
---------------------------------------------- --------- ---------------- ---------------- ---------
Securities issued or guaranteed by
Canadian government 3,386 1 (175) 3,212
Canadian provincial and municipal governments 2,129 1 (160) 1,970
U.S. Treasury, other U.S. agencies and
other foreign governments 2,022 - (144) 1,878
Other debt securities 1,355 - (143) 1,212
Equity securities 570 21 (35) 556
----------------------------------------------- ---------------- ---------------- ---------
9,462 23 (657) 8,828
----------------------------------------------- --------- ---------------- ---------------- ---------
(1) The allowances for credit losses on securities at fair value
through other comprehensive income (excluding the equity
securities), representing $3 million as at July 31, 2023 ($2
million as at October 31, 2022), are reported in Other
comprehensive income. For additional information, see Note 6 to
these consolidated financial statements.
Equity Securities Designated at Fair Value Through Other
Comprehensive Income
The Bank designated certain equity securities, the main business
objective of which is to generate dividend income, at fair value
through other comprehensive income without subsequent
reclassification of gains and losses to net income. During the
nine-month period ended July 31, 2023, a dividend income amount of
$26 million was recognized for these investments ($10 million for
the nine-month period ended July 31, 2022), including amounts of $1
million for investments that were sold during the nine-month period
ended July 31, 2023 ($3 million for investments that were sold
during the nine-month period ended July 31, 2022).
Nine months ended July 31, Nine months ended July 31,
2023 2022
------------------- ------------------------------- -------------------------------------------
Equity
Equity securities
securities of Equity securities Equity securities
of private public of private of
companies companies Total companies public companies Total
------------------- ----------- ----------- ----- ----------------- ----------------- -----
Fair value at
beginning 320 236 556 306 311 617
Change in fair value 5 2 7 (1) (34) (35)
Designated at fair
value through
other comprehensive
income(1) - 255 255 7 106 113
Sales(2) - (246) (246) - (149) (149)
-------------------- ----------- ----------- ----- ----------------- ----------------- -----
Fair value at end 325 247 572 312 234 546
--------------------- ----------- ----------- ----- ----------------- ----------------- -----
(1) On May 2, 2023, the Bank concluded that it had lost
significant influence over TMX Group Limited (TMX) and therefore,
as of this date, ceased using the equity method to account for this
investment. The Bank designated its investment in TMX as a
financial asset measured at fair value through other comprehensive
income in an amount of $191 million.
(2) The Bank disposed of private and public company equity securities for economic reasons.
Note 5 - Securities (cont.)
Securities at Amortized Cost
As at July As at October
31, 2023 31, 2022
------------------------------------------------------ ---------- -------------
Securities issued or guaranteed by
Canadian government 5,956 5,737
Canadian provincial and municipal governments 1,926 1,826
U.S. Treasury, other U.S. agencies and other foreign
governments 495 150
Other debt securities 3,650 5,810
------------------------------------------------------ ---------- -------------
Gross carrying value 12,027 13,523
Allowances for credit losses 8 7
------------------------------------------------------ ---------- -------------
Carrying value 12,019 13,516
------------------------------------------------------ ---------- -------------
Gains (Losses) on Disposals of Securities at Amortized Cost
During the nine-month periods ended July 31, 2023 and 2022, the
Bank disposed of certain debt securities measured at amortized
cost. The carrying value of these securities upon disposal was $821
million for the nine-month period ended July 31, 2023 ($337 million
for the nine-month period ended July 31, 2022), and the Bank
recognized negligible gains for the nine-month period ended July
31, 2023 ($4 million for the nine-month period ended July 31, 2022)
in Non-interest income - Gains (losses) on non-trading securities,
net in the Consolidated Statement of Income.
Note 6 - Loans and Allowances for Credit Losses
Determining and Measuring Expected Credit Losses (ECL)
Determining Expected Credit Losses
Expected credit losses are determined using a three-stage
impairment approach that is based on the change in the credit
quality of financial assets since initial recognition.
Non-Impaired Loans
Stage 1
Financial assets that have experienced no significant increase
in credit risk between initial recognition and the reporting date,
and for which 12-month expected credit losses are recorded at the
reporting date, are classified in Stage 1.
Stage 2
Financial assets that have experienced a significant increase in
credit risk between initial recognition and the reporting date, and
for which lifetime expected credit losses are recorded at the
reporting date, are classified in Stage 2.
Impaired Loans
Stage 3
Financial assets for which there is objective evidence of
impairment, for which one or more events have had a detrimental
impact on the estimated future cash flows of these financial assets
at the reporting date, and for which lifetime expected credit
losses are recorded, are classified in Stage 3.
POCI
Financial assets that are credit-impaired when purchased or
originated (POCI) are classified in the POCI category.
For additional information, see Notes 1 and 7 to the audited
annual consolidated financial statements for the year ended October
31, 2022.
Credit Quality of Loans
The following tables present the gross carrying amounts of loans
as at July 31, 2023 and as at October 31, 2022, according to credit
quality and ECL impairment stage of each loan category at amortized
cost, and according to credit quality for loans at fair value
through profit or loss. For additional information on credit
quality according to the Internal Ratings-Based (IRB) categories,
see the Internal Default Risk Ratings table on page 78 in the
Credit Risk section of the 2022 Annual Report.
As at July 31, 2023
---------------------------- ---------- -------- -------- -------------------------
Non-impaired loans Impaired loans
---------------------------- -------------------- ---------------- -------- -------
Loans
at fair
value
through
profit
Stage Stage Stage or loss
1 2 3 POCI (1) Total
---------------------------- ---------- -------- -------- ------ -------- -------
Residential mortgage
Excellent 29,714 - - - - 29,714
Good 17,013 110 - - - 17,123
Satisfactory 11,484 3,952 - - - 15,436
Special mention 441 751 - - - 1,192
Substandard 62 224 - - - 286
Default - - 54 - - 54
----------------------------- ---------- -------- -------- ------ -------- -------
IRB Approach 58,714 5,037 54 - - 63,805
Standardized Approach 8,730 181 243 307 11,510 20,971
----------------------------- ---------- -------- -------- ------ -------- -------
Gross carrying amount 67,444 5,218 297 307 11,510 84,776
Allowances for credit
losses(2) 63 86 74 (79) - 144
----------------------------- ---------- -------- -------- ------ -------- -------
Carrying amount 67,381 5,132 223 386 11,510 84,632
----------------------------- ---------- -------- -------- ------ -------- -------
Personal
Excellent 21,680 37 - - - 21,717
Good 8,449 612 - - - 9,061
Satisfactory 6,362 1,674 - - - 8,036
Special mention 1,818 808 - - - 2,626
Substandard 34 213 - - - 247
Default - - 152 - - 152
----------------------------- ---------- -------- -------- ------ -------- -------
IRB Approach 38,343 3,344 152 - - 41,839
Standardized Approach 3,604 69 56 225 - 3,954
----------------------------- ---------- -------- -------- ------ -------- -------
Gross carrying amount 41,947 3,413 208 225 - 45,793
Allowances for credit
losses(2) 88 104 85 (8) - 269
----------------------------- ---------- -------- -------- ------ -------- -------
Carrying amount 41,859 3,309 123 233 - 45,524
----------------------------- ---------- -------- -------- ------ -------- -------
Credit card
Excellent 621 - - - - 621
Good 376 - - - - 376
Satisfactory 731 65 - - - 796
Special mention 283 195 - - - 478
Substandard 37 79 - - - 116
Default - - - - - -
---------------------------- ---------- -------- -------- ------ -------- -------
IRB Approach 2,048 339 - - - 2,387
Standardized Approach 104 - - - - 104
----------------------------- ---------- -------- -------- ------ -------- -------
Gross carrying amount 2,152 339 - - - 2,491
Allowances for credit
losses(2) 31 102 - - - 133
----------------------------- ---------- -------- -------- ------ -------- -------
Carrying amount 2,121 237 - - - 2,358
----------------------------- ---------- -------- -------- ------ -------- -------
Business and government
(3)
Excellent 8,477 - - - 1,128 9,605
Good 27,059 3 - - 53 27,115
Satisfactory 31,069 7,440 - - 139 38,648
Special mention 150 1,704 - - - 1,854
Substandard 11 291 326 - - 628
Default - - 51 - - 51
----------------------------- ---------- -------- -------- ------ -------- -------
IRB Approach 66,766 9,438 377 - 1,320 77,901
Standardized Approach 9,478 52 30 - 32 9,592
----------------------------- ---------- -------- -------- ------ -------- -------
Gross carrying amount 76,244 9,490 407 - 1,352 87,493
Allowances for credit
losses(2) 174 184 216 - - 574
----------------------------- ---------- -------- -------- ------ -------- -------
Carrying amount 76,070 9,306 191 - 1,352 86,919
----------------------------- ---------- -------- -------- ------ -------- -------
Total loans and acceptances
Gross carrying amount 187,787 18,460 912 532 12,862 220,553
Allowances for credit
losses(2) 356 476 375 (87) - 1,120
----------------------------- ---------- -------- -------- ------ -------- -------
Carrying amount 187,431 17,984 537 619 12,862 219,433
----------------------------- ---------- -------- -------- ------ -------- -------
(1) Not subject to expected credit losses.
(2) The allowances for credit losses do not include the amounts
related to undrawn commitments reported in the Other liabilities
item of the Consolidated Balance Sheet.
(3) Includes customers' liability under acceptances.
Note 6 - Loans and Allowances for Credit Losses (cont.)
As at October 31, 2022
---------------------------- --------- --------- --------- ---------------------------
Non-impaired loans Impaired loans
---------------------------- -------------------- ---------------- ----------- -------
Loans at
fair value
through
profit
Stage 1 Stage 2 Stage 3 POCI or loss(1) Total
---------------------------- --------- --------- --------- ----- ----------- -------
Residential mortgage
Excellent 30,465 - - - - 30,465
Good 16,351 12 - - - 16,363
Satisfactory 10,765 3,269 - - - 14,034
Special mention 609 394 - - - 1,003
Substandard 76 140 - - - 216
Default - - 49 - - 49
----------------------------- --------- --------- --------- ----- ----------- -------
AIRB Approach 58,266 3,815 49 - - 62,130
Standardized Approach 7,266 179 211 384 9,959 17,999
----------------------------- --------- --------- --------- ----- ----------- -------
Gross carrying amount 65,532 3,994 260 384 9,959 80,129
Allowances for credit
losses(2) 53 80 61 (76) - 118
----------------------------- --------- --------- --------- ----- ----------- -------
Carrying amount 65,479 3,914 199 460 9,959 80,011
----------------------------- --------- --------- --------- ----- ----------- -------
Personal
Excellent 22,190 22 - - - 22,212
Good 8,792 479 - - - 9,271
Satisfactory 6,928 1,394 - - - 8,322
Special mention 358 775 - - - 1,133
Substandard 26 203 - - - 229
Default - - 130 - - 130
----------------------------- --------- --------- --------- ----- ----------- -------
AIRB Approach 38,294 2,873 130 - - 41,297
Standardized Approach 3,837 78 36 75 - 4,026
----------------------------- --------- --------- --------- ----- ----------- -------
Gross carrying amount 42,131 2,951 166 75 - 45,323
Allowances for credit
losses(2) 67 113 75 (16) - 239
----------------------------- --------- --------- --------- ----- ----------- -------
Carrying amount 42,064 2,838 91 91 - 45,084
----------------------------- --------- --------- --------- ----- ----------- -------
Credit card
Excellent 600 - - - - 600
Good 359 - - - - 359
Satisfactory 689 51 - - - 740
Special mention 287 178 - - - 465
Substandard 37 71 - - - 108
Default - - - - - -
---------------------------- --------- --------- --------- ----- ----------- -------
AIRB Approach 1,972 300 - - - 2,272
Standardized Approach 117 - - - - 117
----------------------------- --------- --------- --------- ----- ----------- -------
Gross carrying amount 2,089 300 - - - 2,389
Allowances for credit
losses(2) 31 95 - - - 126
----------------------------- --------- --------- --------- ----- ----------- -------
Carrying amount 2,058 205 - - - 2,263
----------------------------- --------- --------- --------- ----- ----------- -------
Business and government
(3)
Excellent 6,140 2 - - 147 6,289
Good 27,607 112 - - 53 27,772
Satisfactory 26,567 8,803 - - 145 35,515
Special mention 75 1,172 - - - 1,247
Substandard 41 272 - - - 313
Default - - 367 - - 367
----------------------------- --------- --------- --------- ----- ----------- -------
AIRB Approach 60,430 10,361 367 - 345 71,503
Standardized Approach 8,096 28 19 - 212 8,355
----------------------------- --------- --------- --------- ----- ----------- -------
Gross carrying amount 68,526 10,389 386 - 557 79,858
Allowances for credit
losses(2) 115 160 197 - - 472
----------------------------- --------- --------- --------- ----- ----------- -------
Carrying amount 68,411 10,229 189 - 557 79,386
----------------------------- --------- --------- --------- ----- ----------- -------
Total loans and acceptances
Gross carrying amount 178,278 17,634 812 459 10,516 207,699
Allowances for credit
losses(2) 266 448 333 (92) - 955
----------------------------- --------- --------- --------- ----- ----------- -------
Carrying amount 178,012 17,186 479 551 10,516 206,744
----------------------------- --------- --------- --------- ----- ----------- -------
(1) Not subject to expected credit losses.
(2) The allowances for credit losses do not include the amounts
related to undrawn commitments reported in the Other liabilities
item of the Consolidated Balance Sheet.
(3) Includes customers' liability under acceptances.
The following table presents the credit risk exposures of
off-balance-sheet commitments as at July 31, 2023 and as at October
31, 2022 according to credit quality and ECL impairment stage.
As at October
As at July 31, 2023 31, 2022
---------------------- ------ ----------------------- ------ ----- ---------------
Stage Stage Stage Stage Stage Stage
1 2 3 Total 1 2 3 Total
---------------------- ------ ------ ------ ------- ------ ----- ------ -------
Off-balance-sheet
commitments (1)
Retail
Excellent 15,996 25 - 16,021 15,292 13 - 15,305
Good 3,571 220 - 3,791 3,316 165 - 3,481
Satisfactory 1,239 210 - 1,449 1,170 180 - 1,350
Special mention 210 80 - 290 193 68 - 261
Substandard 16 18 - 34 15 15 - 30
Default - - 1 1 - - 1 1
Non-retail
Excellent 14,523 - - 14,523 13,136 - - 13,136
Good 19,840 - - 19,840 18,723 24 - 18,747
Satisfactory 12,271 3,670 - 15,941 7,894 3,488 - 11,382
Special mention 15 219 - 234 12 246 - 258
Substandard 5 28 - 33 4 24 - 28
Default - - 10 10 - - 18 18
---------------------- ------ ------ ------ ------- ------ ----- ------ -------
IRB Approach 67,686 4,470 11 72,167 59,755 4,223 19 63,997
Standardized Approach 17,688 - - 17,688 15,432 - - 15,432
----------------------- ------ ------ ------ ------- ------ ----- ------ -------
Total exposure 85,374 4,470 11 89,855 75,187 4,223 19 79,429
Allowances for
credit losses 100 57 - 157 99 63 - 162
----------------------- ------ ------ ------ ------- ------ ----- ------ -------
Total exposure,
net
of allowances 85,274 4,413 11 89,698 75,088 4,160 19 79,267
---------------------- ------ ------ ------ ------- ------ ----- ------ -------
(1) Represent letters of guarantee and documentary letters of
credit, undrawn commitments, and backstop liquidity and credit
enhancement facilities.
Loans Past Due But Not Impaired (1)
As at October
As at July 31, 2023 31, 2022
---------- ----------------------------------------- ----------- -------- ------------------
Business Business
and and
Residential Credit government Residential Credit government
mortgage Personal card (2) mortgage Personal card (2)
---------- ----------- -------- ------ ---------- ----------- -------- ------ ----------
Past due
but not
impaired
31 to 60
days 117 103 23 38 106 105 23 23
61 to 90
days 56 40 12 12 38 30 11 9
Over 90
days(3) - - 27 - - - 22 -
----------- ----------- -------- ------ ---------- ----------- -------- ------ ----------
173 143 62 50 144 135 56 32
----------- ----------- -------- ------ ---------- ----------- -------- ------ ----------
(1) Loans less than 31 days past due are not presented as they
are not considered past due from an administrative standpoint.
(2) Includes customers' liability under acceptances.
(3) All loans more than 90 days past due, except for credit card
receivables, are considered impaired (Stage 3).
Impaired Loans
As at July 31,
2023 As at October 31, 2022
---------------------------- ----- ----------------- --------------------------
Allowances Allowances
for for
credit credit
Gross losses Net Gross losses Net
--------------------------- ----- ---------- ----- ------ ----------- -----
Loans - Stage 3
Residential mortgage 297 74 223 260 61 199
Personal 208 85 123 166 75 91
Credit card(1) - - - - - -
Business and government(2) 407 216 191 386 197 189
--------------------------- ----- ---------- ----- ------ ----------- -----
912 375 537 812 333 479
Loans - POCI 532 (87) 619 459 (92) 551
---------------------------- ----- ---------- ----- ------ ----------- -----
1,444 288 1,156 1,271 241 1,030
--------------------------- ----- ---------- ----- ------ ----------- -----
(1) Credit card receivables are considered impaired, at the
latest, when payment is 180 days past due, and they are written off
at that time.
(2) Includes customers' liability under acceptances.
Note 6 - 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
July 31, 2023
-------------------------------- ---------- ---------- ---------- --------- ----------------------
Allowances Allowances
for for
credit credit
losses Provisions losses as
as at for at
April credit Write-offs Recoveries July 31,
30, 2023 losses (1) Disposals and other 2023
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Balance sheet
Cash and deposits with financial 7 2 - - -
institutions (2)(3) 9
--------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Securities (3)
At fair value through other 2 1 - - -
comprehensive income(4) 3
At amortized cost(2) 8 - - - - 8
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Securities purchased under
reverse repurchase
agreements and securities - - - - -
borrowed (2)(3) -
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Loans (5)
Residential mortgage 141 4 - - (1) 144
Personal 262 32 (29) - 4 269
Credit card 134 17 (22) - 4 133
Business and government 495 34 (4) - (1) 524
Customers' liability under
acceptances 38 12 - - - 50
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
1,070 99 (55) - 6 1,120
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Other assets (2)(3) - - - - - -
--------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Off-balance-sheet commitments
(6)
Letters of guarantee and
documentary letters of credit 11 2 - - - 13
Undrawn commitments 131 6 - - - 137
Backstop liquidity and credit 6 1 - - -
enhancement facilities 7
--------------------------------- ---------- ---------- ---------- --------- ---------- ----------
148 9 - - - 157
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
1,235 111 (55) - 6 1,297
--------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Quarter ended July
31, 2022
------------------------- ---------- ---------- ------------- --------- --------------------------
Allowances
for Allowances
credit for
losses Provisions credit losses
as at for as at
April 30, credit Recoveries July 31,
2022 losses Write-offs(1) Disposals and other 2022
------------------------- ---------- ---------- ------------- --------- ---------- --------------
Balance sheet
Cash and deposits with
financial
institutions (2)(3) 5 - - - - 5
-------------------------- ---------- ---------- ------------- --------- ---------- --------------
Securities (3)
At fair value through
other
comprehensive income(4) 1 - - - - 1
At amortized cost(2) 6 (1) - - - 5
------------------------- ---------- ---------- ------------- --------- ---------- --------------
Securities purchased under
reverse repurchase
agreements and securities - - - - -
borrowed (2)(3) -
------------------------- ---------- ---------- ------------- --------- ---------- --------------
Loans (5)
Residential mortgage 81 10 (1) - 1 91
Personal 215 26 (13) - 3 231
Credit card 122 15 (15) - 3 125
Business and government 448 9 (1) - 1 457
Customers' liability
under
acceptances 49 (1) - - - 48
------------------------- ---------- ---------- ------------- --------- ---------- --------------
915 59 (30) - 8 952
------------------------- ---------- ---------- ------------- --------- ---------- --------------
Other assets (2)(3) - - - - - -
-------------------------- ---------- ---------- ------------- --------- ---------- --------------
Off-balance-sheet
commitments
(6)
Letters of guarantee and
documentary letters of
credit 11 1 - - - 12
Undrawn commitments 115 (2) - - - 113
Backstop liquidity and
credit
enhancement facilities 5 - - - - 5
-------------------------- ---------- ---------- ------------- --------- ---------- --------------
131 (1) - - - 130
------------------------- ---------- ---------- ------------- --------- ---------- --------------
1,058 57 (30) - 8 1,093
-------------------------- ---------- ---------- ------------- --------- ---------- --------------
(1) The contractual amount outstanding on financial assets that
were written off during the quarter ended July 31, 2023 and that
are still subject to enforcement activity was $31 million ($21
million for the quarter ended July 31, 2022).
(2) These financial assets are presented net of the allowances
for credit losses on the Consolidated Balance Sheet.
(3) As at July 31, 2023 and 2022, these financial assets were
mainly classified in Stage 1 and their credit quality fell mostly
within the Excellent category.
(4) The allowances for credit losses are reported in the
Accumulated other comprehensive income item of the Consolidated
Balance Sheet.
(5) The allowances for credit losses are reported in the
Allowances for credit losses item of the Consolidated Balance
Sheet.
(6) The allowances for credit losses are reported in the Other
liabilities item of the Consolidated Balance Sheet.
Nine months ended July
31, 2023
-------------------------------- ---------- ---------- ---------- ---------------------------------
Allowances Allowances
for for
credit credit
losses Provisions losses as
as at for at
October credit Write-offs Recoveries July 31,
31, 2022 losses (1) Disposals and other 2023
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Balance sheet
Cash and deposits with financial 5 4 - - -
institutions (2)(3) 9
--------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Securities (3)
At fair value through other 2 1 - - -
comprehensive income(4) 3
At amortized cost(2) 7 1 - - - 8
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Securities purchased under
reverse repurchase
agreements and securities - - - - -
borrowed (2)(3) -
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Loans (5)
Residential mortgage 118 29 (1) - (2) 144
Personal 239 84 (66) - 12 269
Credit card 126 56 (60) - 11 133
Business and government 418 116 (12) - 2 524
Customers' liability under
acceptances 54 (4) - - - 50
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
955 281 (139) - 23 1,120
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Other assets (2)(3) - - - - - -
--------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Off-balance-sheet commitments
(6)
Letters of guarantee and
documentary letters of credit 13 - - - - 13
Undrawn commitments 143 (6) - - - 137
Backstop liquidity and credit 6 1 - - -
enhancement facilities 7
--------------------------------- ---------- ---------- ---------- --------- ---------- ----------
162 (5) - - - 157
-------------------------------- ---------- ---------- ---------- --------- ---------- ----------
1,131 282 (139) - 23 1,297
--------------------------------- ---------- ---------- ---------- --------- ---------- ----------
Nine months ended
July 31, 2022
------------------------- ---------- ---------- ------------- --------- --------------------------
Allowances
for Allowances
credit for
losses Provisions credit losses
as at for as at
October credit Recoveries July 31,
31, 2021 losses Write-offs(1) Disposals and other 2022
------------------------- ---------- ---------- ------------- --------- ---------- --------------
Balance sheet
Cash and deposits with
financial
institutions (2)(3) 5 - - - - 5
-------------------------- ---------- ---------- ------------- --------- ---------- --------------
Securities (3)
At fair value through
other
comprehensive income(4) 1 - - - - 1
At amortized cost(2) 3 2 - - - 5
------------------------- ---------- ---------- ------------- --------- ---------- --------------
Securities purchased under
reverse repurchase
agreements and securities - - - - -
borrowed (2)(3) -
------------------------- ---------- ---------- ------------- --------- ---------- --------------
Loans (5)
Residential mortgage 71 21 (3) - 2 91
Personal 202 52 (36) - 13 231
Credit card 122 36 (45) - 12 125
Business and government 515 19 (82) - 5 457
Customers' liability
under
acceptances 88 (40) - - - 48
------------------------- ---------- ---------- ------------- --------- ---------- --------------
998 88 (166) - 32 952
------------------------- ---------- ---------- ------------- --------- ---------- --------------
Other assets (2)(3) - - - - - -
-------------------------- ---------- ---------- ------------- --------- ---------- --------------
Off-balance-sheet
commitments
(6)
Letters of guarantee and
documentary letters of
credit 13 (1) - - - 12
Undrawn commitments 143 (30) - - - 113
Backstop liquidity and
credit
enhancement facilities 6 (1) - - - 5
-------------------------- ---------- ---------- ------------- --------- ---------- --------------
162 (32) - - - 130
------------------------- ---------- ---------- ------------- --------- ---------- --------------
1,169 58 (166) - 32 1,093
-------------------------- ---------- ---------- ------------- --------- ---------- --------------
(1) The contractual amount outstanding on financial assets that
were written off during the nine-month period ended July 31, 2023
and that are still subject to enforcement activity was $83 million
($68 million for the nine -month period ended July 31, 2022).
(2) These financial assets are presented net of the allowances
for credit losses on the Consolidated Balance Sheet.
(3) As at July 31, 2023 and 2022, these financial assets were
mainly classified in Stage 1 and their credit quality fell mostly
within the Excellent category.
(4) The allowances for credit losses are reported in the
Accumulated other comprehensive income item of the Consolidated
Balance Sheet.
(5) The allowances for credit losses are reported in the
Allowances for credit losses item of the Consolidated Balance
Sheet.
(6) The allowances for credit losses are reported in the Other
liabilities item of the Consolidated Balance Sheet.
Note 6 - Loans and Allowances for Credit Losses (cont.)
The following tables present a reconciliation of allowances for
credit losses for each loan category at amortized cost according to
ECL impairment stage.
Quarter ended July Quarter ended
31, 2023 July 31, 2022
------------------ ----- ----------------------------- ------ ------- -----------------------
Allowances Allowances Allowances Allowances
for for for for
credit losses credit losses credit losses credit losses
on on on on
non-impaired impaired non-impaired impaired
loans loans loans loans
------------------ -------------- ------------- ----- --------------- ---------------- -----
Stage Stage Stage POCI Stage Stage Stage
1 2 3 (1) Total 1 2 3 POCI(1) Total
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Residential mortgage
Balance at beginning 64 81 63 (67) 141 44 57 39 (59) 81
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Originations or
purchases 5 - - - 5 5 - - - 5
Transfers(2) :
to Stage 1 17 (17) - - - 5 (4) (1) - -
to Stage 2 (3) 5 (2) - - (1) 3 (2) - -
to Stage 3 (1) (7) 8 - - - (1) 1 - -
Net remeasurement
of
loss allowances(3) (12) 20 7 (14) 1 (4) 3 9 (1) 7
Derecognitions(4) (1) (2) (1) - (4) (1) - (1) - (2)
Changes to models (5) 7 - - 2 - - - - -
Provisions for
credit
losses - 6 12 (14) 4 4 1 6 (1) 10
Write-offs - - - - - - - (1) - (1)
Disposals - - - - - - - - - -
Recoveries - - 1 - 1 - - 1 - 1
Foreign exchange
movements
and other (1) (1) (2) 2 (2) - - - - -
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Balance at end 63 86 74 (79) 144 48 58 45 (60) 91
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Includes:
Amounts drawn 63 86 74 (79) 144 48 58 45 (60) 91
Undrawn
commitments(5) - - - - - - - - - -
------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Personal
Balance at beginning 82 114 83 (10) 269 70 109 65 (22) 222
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Originations or
purchases 16 - - - 16 14 - - - 14
Transfers(2) :
to Stage 1 24 (21) (3) - - 19 (18) (1) - -
to Stage 2 (7) 9 (2) - - (3) 4 (1) - -
to Stage 3 (1) (29) 30 - - - (6) 6 - -
Net remeasurement
of
loss allowances(3) (19) 38 2 2 23 (22) 30 9 8 25
Derecognitions(4) (3) (5) (1) - (9) (3) (4) (2) - (9)
Changes to models - 3 - - 3 (2) (2) - - (4)
Provisions for
credit
losses 10 (5) 26 2 33 3 4 11 8 26
Write-offs - - (29) - (29) - - (13) - (13)
Disposals - - - - - - - - - -
Recoveries - - 6 - 6 - - 3 - 3
Foreign exchange
movements
and other (1) - (1) - (2) - - 1 (1) -
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Balance at end 91 109 85 (8) 277 73 113 67 (15) 238
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Includes:
Amounts drawn 88 104 85 (8) 269 71 108 67 (15) 231
Undrawn
commitments(5) 3 5 - - 8 2 5 - - 7
------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
(1) The total amount of undiscounted initially expected credit
losses on the POCI loans acquired during the quarter ended July 31,
2023 was $34 million ($3 million for the quarter ended July 31,
2022). The expected credit losses reflected in the purchase price
have been discounted.
(2) Represent stage transfers deemed to have taken place at the
beginning of the quarter in which the transfer occurred.
(3) Includes the net remeasurement of loss allowances (after
transfers) attributable mainly to changes in volumes and in the
credit quality of existing loans as well as to changes in risk
parameters.
(4) Represent reversals to loss allowances arising from full
loan repayments (excluding write-offs and disposals).
(5) The allowances for credit losses on undrawn commitments are
reported in the Other liabilities item of the Consolidated Balance
Sheet.
Quarter ended July Quarter ended
31, 2023 July 31, 2022
------------------ ------ ----------------------------- ------ ------- -----------------------
Allowances Allowances Allowances Allowances
for for for for
credit losses credit losses credit losses credit losses
on on on on
non-impaired impaired non-impaired impaired
loans loans loans loans
------------------ --------------- ------------- ----- --------------- ---------------- -----
Stage Stage Stage POCI Stage Stage Stage
1 2 3 (1) Total 1 2 3 POCI(1) Total
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Credit card
Balance at beginning 57 121 - - 178 55 102 - - 157
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Originations or
purchases 3 - - - 3 3 - - - 3
Transfers(2) :
to Stage 1 27 (27) - - - 24 (24) - - -
to Stage 2 (5) 5 - - - (3) 3 - - -
to Stage 3 - (9) 9 - - (1) (6) 7 - -
Net remeasurement
of
loss allowances(3) (24) 34 9 - 19 (21) 29 5 - 13
Derecognitions(4) - (1) - - (1) (1) - - - (1)
Changes to models - - - - - - - - - -
Provisions for
credit
losses 1 2 18 - 21 1 2 12 - 15
Write-offs - - (22) - (22) - - (15) - (15)
Disposals - - - - - - - - - -
Recoveries - - 4 - 4 - - 3 - 3
Foreign exchange
movements
and other - - - - - - - - - -
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Balance at end 58 123 - - 181 56 104 - - 160
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Includes:
Amounts drawn 31 102 - - 133 34 91 - - 125
Undrawn
commitments(5) 27 21 - - 48 22 13 - - 35
------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Business and
government
(6)
Balance at beginning 218 204 191 - 613 166 190 214 - 570
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Originations or
purchases 19 - - - 19 23 - - - 23
Transfers(2) :
to Stage 1 6 (6) - - - 16 (16) - - -
to Stage 2 (7) 8 (1) - - (5) 6 (1) - -
to Stage 3 - (2) 2 - - - (1) 1 - -
Net remeasurement
of
loss allowances(3) (2) 9 28 - 35 (15) 24 (11) - (2)
Derecognitions(4) (4) (3) - - (7) (6) (8) (1) - (15)
Changes to models - - - - - - - - - -
Provisions for
credit
losses 12 6 29 - 47 13 5 (12) - 6
Write-offs - - (4) - (4) - - (1) - (1)
Disposals - - - - - - - - - -
Recoveries - - - - - - - 1 - 1
Foreign exchange
movements
and other - (1) - - (1) - - - - -
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Balance at end 230 209 216 - 655 179 195 202 - 576
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Includes:
Amounts drawn 174 184 216 - 574 129 174 202 - 505
Undrawn
commitments(5) 56 25 - - 81 50 21 - - 71
------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Total allowances for
credit losses at
end
(7) 442 527 375 (87) 1,257 356 470 314 (75) 1,065
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Includes:
Amounts drawn 356 476 375 (87) 1,120 282 431 314 (75) 952
Undrawn
commitments(5) 86 51 - - 137 74 39 - - 113
------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
(1) The total amount of undiscounted initially expected credit
losses on the POCI loans acquired during the quarter ended July 31,
2023 was $34 million ($3 million for the quarter ended July 31,
2022 ). The expected credit losses reflected in the purchase price
have been discounted.
(2) Represent stage transfers deemed to have taken place at the
beginning of the quarter in which the transfer occurred.
(3) Includes the net remeasurement of loss allowances (after
transfers) attributable mainly to changes in volumes and in the
credit quality of existing loans as well as to changes in risk
parameters.
(4) Represent reversals to loss allowances arising from full
loan repayments (excluding write-offs and disposals).
(5) The allowances for credit losses on undrawn commitments are
reported in the Other liabilities item of the Consolidated Balance
Sheet.
(6) Includes customers' liability under acceptances.
(7) Excludes allowances for credit losses on other financial assets at amortized cost and on off-balance-sheet commitments other than undrawn commitments.
Note 6 - Loans and Allowances for Credit Losses (cont.)
Nine months ended July Nine months ended July 31,
31, 2023 2022
------------------ ------------------------------------ ----------------------------------------
Allowances Allowances Allowances Allowances
for for for for
credit losses credit losses credit losses credit losses
on on on on
non-impaired impaired non-impaired impaired
loans loans loans loans
------------------ -------------- ------------- ----- --------------- ---------------- -----
Stage Stage Stage POCI Stage Stage Stage
1 2 3 (1) Total 1 2 3 POCI(1) Total
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Residential mortgage
Balance at beginning 53 80 61 (76) 118 50 52 29 (60) 71
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Originations or
purchases 13 - - - 13 14 - - - 14
Transfers(2) :
to Stage 1 38 (35) (3) - - 15 (13) (2) - -
to Stage 2 (9) 23 (14) - - (3) 5 (2) - -
to Stage 3 (1) (21) 22 - - - (1) 1 - -
Net remeasurement
of
loss allowances(3) (21) 41 15 (6) 29 (27) 16 21 2 12
Derecognitions(4) (4) (7) (4) - (15) (2) (2) (1) - (5)
Changes to models (5) 7 - - 2 - - - - -
Provisions for
credit
losses 11 8 16 (6) 29 (3) 5 17 2 21
Write-offs - - (1) - (1) - - (3) - (3)
Disposals - - - - - - - - - -
Recoveries - - 1 - 1 - - 2 - 2
Foreign exchange
movements
and other (1) (2) (3) 3 (3) 1 1 - (2) -
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Balance at end 63 86 74 (79) 144 48 58 45 (60) 91
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Includes:
Amounts drawn 63 86 74 (79) 144 48 58 45 (60) 91
Undrawn
commitments(5) - - - - - - - - - -
------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Personal
Balance at beginning 70 117 75 (16) 246 73 103 63 (29) 210
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Originations or
purchases 33 - - - 33 38 - - - 38
Transfers(2) :
to Stage 1 72 (66) (6) - - 50 (46) (4) - -
to Stage 2 (14) 18 (4) - - (9) 11 (2) - -
to Stage 3 (1) (55) 56 - - - (19) 19 - -
Net remeasurement
of
loss allowances(3) (62) 106 20 8 72 (67) 69 17 15 34
Derecognitions(4) (7) (14) (3) - (24) (8) (12) (3) - (23)
Changes to models 1 3 - - 4 (4) 6 - - 2
Provisions for
credit
losses 22 (8) 63 8 85 - 9 27 15 51
Write-offs - - (66) - (66) - - (36) - (36)
Disposals - - - - - - - - - -
Recoveries - - 15 - 15 - - 13 - 13
Foreign exchange
movements
and other (1) - (2) - (3) - 1 - (1) -
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Balance at end 91 109 85 (8) 277 73 113 67 (15) 238
-------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
Includes:
Amounts drawn 88 104 85 (8) 269 71 108 67 (15) 231
Undrawn
commitments(5) 3 5 - - 8 2 5 - - 7
------------------- ----- ------- ----- ------ ----- ------ ------- ------ -------- -----
(1) The total amount of undiscounted initially expected credit
losses on the POCI loans acquired during the nine-month period
ended July 31, 2023 was $34 million ($12 million during the
nine-month period ended July 31, 2022). The expected credit losses
reflected in the purchase price have been discounted.
(2) Represent stage transfers deemed to have taken place at the
beginning of the quarter in which the transfer occurred.
(3) Includes the net remeasurement of loss allowances (after
transfers) attributable mainly to changes in volumes and in the
credit quality of existing loans as well as to changes in risk
parameters.
(4) Represent reversals to loss allowances arising from full
loan repayments (excluding write-offs and disposals).
(5) The allowances for credit losses on undrawn commitments are
reported in the Other liabilities item of the Consolidated Balance
Sheet.
Nine months ended July Nine months ended July 31,
31, 2023 2022
------------------ ------------------------------------- ----------------------------------------
Allowances Allowances Allowances Allowances
for for for for
credit losses credit losses credit losses credit losses
on on on on
non-impaired impaired non-impaired impaired
loans loans loans loans
------------------ --------------- ------------- ----- --------------- ---------------- -----
Stage Stage Stage POCI Stage Stage Stage
1 2 3 (1) Total 1 2 3 POCI(1) Total
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Credit card
Balance at beginning 53 112 - - 165 57 101 - - 158
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Originations or
purchases 8 - - - 8 9 - - - 9
Transfers(2) :
to Stage 1 74 (74) - - - 67 (67) - - -
to Stage 2 (13) 13 - - - (12) 12 - - -
to Stage 3 - (25) 25 - - (1) (17) 18 - -
Net remeasurement
of
loss allowances(3) (62) 99 24 - 61 (62) 76 15 - 29
Derecognitions(4) (2) (2) - - (4) (2) (1) - - (3)
Changes to models - - - - - - - - - -
Provisions for
credit
losses 5 11 49 - 65 (1) 3 33 - 35
Write-offs - - (60) - (60) - - (45) - (45)
Disposals - - - - - - - - - -
Recoveries - - 11 - 11 - - 12 - 12
Foreign exchange
movements
and other - - - - - - - - - -
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Balance at end 58 123 - - 181 56 104 - - 160
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Includes:
Amounts drawn 31 102 - - 133 34 91 - - 125
Undrawn
commitments(5) 27 21 - - 48 22 13 - - 35
------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Business and
government
(6)
Balance at beginning 177 195 197 - 569 177 238 287 - 702
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Originations or
purchases 65 - - - 65 59 - - - 59
Transfers(2) :
to Stage 1 38 (38) - - - 56 (56) - - -
to Stage 2 (18) 22 (4) - - (17) 20 (3) - -
to Stage 3 - (4) 4 - - - (2) 2 - -
Net remeasurement
of
loss allowances(3) (17) 57 33 - 73 (72) 20 (4) - (56)
Derecognitions(4) (14) (22) (4) - (40) (24) (25) (3) - (52)
Changes to models (1) (1) - - (2) - - - - -
Provisions for
credit
losses 53 14 29 - 96 2 (43) (8) - (49)
Write-offs - - (12) - (12) - - (82) - (82)
Disposals - - - - - - - - - -
Recoveries - - 3 - 3 - - 3 - 3
Foreign exchange
movements
and other - - (1) - (1) - - 2 - 2
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Balance at end 230 209 216 - 655 179 195 202 - 576
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Includes:
Amounts drawn 174 184 216 - 574 129 174 202 - 505
Undrawn
commitments(5) 56 25 - - 81 50 21 - - 71
------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Total allowances for
credit losses at
end
(7) 442 527 375 (87) 1,257 356 470 314 (75) 1,065
-------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
Includes:
Amounts drawn 356 476 375 (87) 1,120 282 431 314 (75) 952
Undrawn
commitments(5) 86 51 - - 137 74 39 - - 113
------------------- ------ ------- ----- ------ ----- ------ ------- ------ -------- -----
(1) The total amount of undiscounted initially expected credit
losses on the POCI loans acquired during the nine-month period
ended July 31, 2023 was $34 million ($12 million during the
nine-month period ended July 31, 2022). The expected credit losses
reflected in the purchase price have been discounted.
(2) Represent stage transfers deemed to have taken place at the
beginning of the quarter in which the transfer occurred.
(3) Includes the net remeasurement of loss allowances (after
transfers) attributable mainly to changes in volumes and in the
credit quality of existing loans as well as to changes in risk
parameters.
(4) Represent reversals to loss allowances arising from full
loan repayments (excluding write-offs and disposals).
(5) The allowances for credit losses on undrawn commitments are
reported in the Other liabilities item of the Consolidated Balance
Sheet.
(6) Includes customers' liability under acceptances.
(7) Excludes allowances for credit losses on other financial assets at amortized cost and on off-balance-sheet commitments other than undrawn commitments.
Note 6 - Loans and Allowances for Credit Losses (cont.)
Main Macroeconomic Factors
The following tables show the main macroeconomic factors used to
estimate the allowances for credit losses on loans. For each
scenario, namely, the base scenario, upside scenario, and downside
scenario, the average values of the macroeconomic factors over the
next 12 months (used for Stage 1 credit loss calculations) and over
the remaining forecast period (used for Stage 2 credit loss
calculations) are presented.
As at July 31, 2023
------------------ --------- ------ --- --------- ------ --- -------------------------
Base scenario Upside scenario Downside scenario
----------------- -------------------------- -------------------------- -------------------------
Remaining Remaining Next Remaining
Next forecast Next forecast 12 forecast
12 months period 12 months period months period
----------------- --------- ----------- --------- ----------- -------- -----------
Macroeconomic
factors
(1)
GDP growth(2) (0.4) % 1.7 % 0.4 % 1.9 % (4.9) % 2.6 %
Unemployment rate 6.1 % 6.5 % 5.7 % 5.6 % 7.5 % 7.0 %
Housing price
index
growth(2) - % 2.4 % 6.1 % 2.3 % (13.9) % 0.3 %
BBB spread(3) 2.4 % 2.1 % 1.9 % 1.8 % 3.1 % 2.4 %
S&P/TSX
growth(2)(4) (5.5) % 3.7 % 4.0 % 3.0 % (25.6) % 5.5 %
WTI oil price(5)
(US$ per barrel) 67 70 82 77 41 50
------------------ --------- ------ --- --------- ------ --- -------- ------ ---
As at April 30, 2023
------------------ -------- ------ --- --------- ------ --- --------------------------
Base scenario Upside scenario Downside scenario
----------------- ------------------------- -------------------------- --------------------------
Next Remaining Remaining Next Remaining
12 forecast Next forecast 12 forecast
months period 12 months period months period
----------------- -------- ----------- --------- ----------- -------- --- -----------
Macroeconomic
factors
(1)
GDP growth(2) (0.3)% 1.7% 0.5% 1.9% (5.1)% 2.6%
Unemployment rate 5.8% 6.3% 5.5% 5.5% 7.3% 6.9%
Housing price
index
growth(2) (6.6)% 1.4% (0.7)% 1.2% (13.9)% 0.3%
BBB spread(3) 2.2% 2.0% 1.9% 1.8% 3.1% 2.3%
S&P/TSX
growth(2)(4) 1.2% 2.0% 5.6% 2.6% (25.6)% 5.5%
WTI oil price(5)
(US$ per barrel) 71 69 84 80 43 52
------------------ -------- ------ --- --------- ------ --- -------- --- ------ ---
As at October 31,
2022
------------------ -------- ------ --- --------- ------ --- --------------------------
Base scenario Upside scenario Downside scenario
----------------- ------------------------- -------------------------- --------------------------
Next Remaining Remaining Remaining
12 forecast Next forecast Next forecast
months period 12 months period 12 months period
----------------- -------- ----------- --------- ----------- --------- -----------
Macroeconomic
factors
(1)
GDP growth(2) 0.6% 1.7% 1.1% 1.6% (5.2)% 2.9%
Unemployment rate 6.0% 6.1% 5.4% 5.4% 7.4% 6.4%
Housing price
index
growth(2) (11.2)% 0.7% -% 0.2% (13.9)% 0.3%
BBB spread(3) 2.4% 2.1% 2.0% 1.9% 3.4% 2.6%
S&P/TSX
growth(2)(4) (4.3)% 2.4% 5.1% 2.6% (25.6)% 5.5%
WTI oil price(5)
(US$ per barrel) 78 77 102 97 44 51
------------------ -------- ------ --- --------- ------ --- --------- ------ ---
(1) All macroeconomic factors are based on the Canadian economy unless otherwise indicated.
(2) Growth rate is annualized.
(3) Yield on corporate BBB bonds less yield on Canadian federal
government bonds with 10-year maturity.
(4) Main stock index in Canada.
(5) The West Texas Intermediate (WTI) index is commonly used as
a benchmark for the price of oil.
The main macroeconomic factors used for the personal credit
portfolio are unemployment rate and growth in the housing price
index, based on the economy of Canada or Quebec. The main
macroeconomic factors used for the business and government credit
portfolio are unemployment rate, spread on corporate BBB bonds,
S&P/TSX growth, and WTI oil price. An increase in unemployment
rate or BBB spread will generally lead to higher allowances for
credit losses, whereas an increase in the other macroeconomic
factors (GDP, S&P/TSX, housing price index, and WTI oil price)
will generally lead to lower allowances for credit losses.
During the quarter ended July 31, 2023, the macroeconomic
outlook deteriorated slightly and uncertainty remains high .
The global economic outlook evolved during the quarter, with
inflation showing some improvement. This does not mean that the
global economy is out of the woods, as most central banks are
sticking with tight monetary policy and remain determined to lower
the still-too-high level of inflation. In the United States, the
agreement to raise the debt ceiling soothed worries, but a new risk
emerged, namely, the restart of student loan payments coming in
October, which could slow consumption. As financial conditions
tighten, the U.S. economy could falter as of the fourth quarter of
this year. In Canada, the Bank of Canada maintained its tightening
policy in response to persistently strong inflation and domestic
demand. However, the last rate hike came as the labour market
appeared to be cooling, as evidenced by a higher unemployment rate.
An erosion in company earnings should lead to greater prudence in
workforce management. Consumption should contract slightly as a
result of considerable interest payment shock, while growth in
Canada should be lethargic. Despite these factors, strong
demographic growth, greater excess savings, and ongoing
advantageous foreign exchange terms lead us to believe that
Canada's economy might be more resilient than the U.S. economy in
the coming quarters. After 12 months, the unemployment rate rises
1.3 percentage points to 6.5%. Housing prices remain unchanged
compared to a year ago. The S&P/TSX sits at 19,078 points after
one year, and the price of oil hovers around US$65.
In the upside scenario, an easing of geopolitical tensions
boosts confidence. Inflation comes under control as supply chains
normalize, and the tight monetary policy does not inflict too much
damage on the economy. Governments maintain a sizable fiscal
stimulus in Canada and the United States, offsetting the tight
monetary policy. In Canada, consumer spending is surprisingly high
because of the excess savings amassed since the start of the
pandemic. The housing market shows renewed vigour. After one year,
the unemployment rate is more favourable than the base scenario
(six-tenths lower). Housing prices rise 6.1%, the S&P/TSX is at
20,990 points after one year, and the price of oil hovers around
US$81.
In the downside scenario, central bankers have underestimated
the impact of their simultaneous tightening measures, and the
global economy sinks into a recession, as a decrease in demand is
reflected in reduced investment by businesses, which also carry out
significant layoffs. Given budgetary constraints, governments
cannot support households and businesses as they did during the
pandemic. After 12 months, the economic contraction pushes the
unemployment rate to 8.2%. Housing prices decrease considerably.
The S&P/TSX sits at 15,018 points after one year, and the price
of oil hovers around US$36.
Given the uncertainty surrounding key inputs used to measure
credit losses, the Bank has applied expert credit judgment to
adjust the modelled expected credit loss results.
Sensitivity Analysis of Allowances for Credit Losses on
Non-Impaired Loans
Scenarios
The following table shows a comparison of the Bank's allowances
for credit losses on non-impaired loans (Stages 1 and 2) as at July
31, 2023 based on the probability weightings of three scenarios
with allowances for credit losses resulting from simulations of
each scenario weighted at 100%.
Allowances
for credit
losses on non-impaired
loans
---------------------------- -----------------------
Balance as at July 31, 2023 969
----------------------------- -----------------------
Simulations
100% upside scenario 692
100% base scenario 785
100% downside scenario 1,237
----------------------------- -----------------------
Note 7 - Other Assets
As at July As at October
31, 2023 31, 2022
---------------------------------------------- ---------- -------------
Receivables, prepaid expenses and other items 3,874 2,591
Interest and dividends receivable 1,458 1,057
Due from clients, dealers and brokers 640 842
Defined benefit asset 420 498
Deferred tax assets 487 389
Current tax assets 875 471
Reinsurance assets - 6
Insurance assets 143 104
----------------------------------------------- ---------- -------------
7,897 5,958
---------------------------------------------- ---------- -------------
Note 8 - Deposits
As at October
As at July 31, 2023 31, 2022
---------------------------- --------- ------------ --------------------- -------------
On demand After notice Fixed term
(1) (2) (3) Total Total
---------------------------- --------- ------------ ------------ ------- -------------
Personal 4,385 35,294 46,911 86,590 78,811
Business and government 62,964 33,391 96,413 192,768 184,230
Deposit-taking institutions 1,292 108 1,565 2,965 3,353
----------------------------- --------- ------------ ------------ ------- -------------
68,641 68,793 144,889 282,323 266,394
---------------------------- --------- ------------ ------------ ------- -------------
(1) Demand deposits are deposits for which the Bank does not
have the right to require a notice of withdrawal and consist
essentially of deposits in chequing accounts.
(2) Notice deposits are deposits for which the Bank may legally
require a notice of withdrawal and consist mainly of deposits in
savings accounts.
(3) Fixed-term deposits are deposits that can be withdrawn by
the holder on a specified date and include term deposits,
guaranteed investment certificates, savings accounts and plans,
covered bonds, and other similar instruments.
The Deposits - Business and government item includes, among
other items, covered bonds for which the balance was $11.8 billion
as at July 31, 2023 ($10.4 billion as at October 31, 2022). During
the nine-month period ended July 31, 2023, the Bank issued 280
million Swiss francs and 1.0 billion euros in covered bonds, and
750 million euros in covered bonds came to maturity (the Bank
issued 1.3 billion euros, US$1.5 billion and 750 million pounds
sterling in covered bonds, and 1.0 billion euros and US$1.0 billion
in covered bonds came to maturity during the nine-month period
ended July 31, 2022). For additional information on covered bonds,
see Note 27 to the audited annual consolidated financial statements
for the year ended October 31, 2022.
In addition, as at July 31, 2023, the Deposits - Business and
government item also includes deposits of $ 17.1 billion ($ 12.8
billion as at October 31, 2022) that are subject to the bank
bail-in conversion regulations issued by the Government of Canada.
These regulations provide certain powers to the Canada Deposit
Insurance Corporation (CDIC), notably the power to convert certain
eligible Bank shares and liabilities into common shares should the
Bank become non-viable.
Note 9 - Other Liabilities
As at July As at October
31, 2023 31, 2022
------------------------------------------------- ---------- -------------
Accounts payable and accrued expenses 2,306 2,582
Subsidiaries' debts to third parties 335 156
Interest and dividends payable 1,749 1,063
Lease liabilities 519 552
Due to clients, dealers and brokers 737 730
Defined benefit liability 113 111
Allowances for credit losses - Off-balance-sheet
commitments (Note 6) 157 162
Deferred tax liabilities 31 14
Current tax liabilities 176 67
Insurance liabilities 7 10
Other items(1)(2)(3) 925 914
-------------------------------------------------- ---------- -------------
7,055 6,361
------------------------------------------------- ---------- -------------
(1) As at July 31, 2023, Other items included $4 million in
litigation provisions ($11 million as at October 31, 2022).
(2) As at July 31, 2023, Other items included $33 million in
provisions for onerous contracts ($33 million as at October 31,
2022 ).
(3) As at July 31, 2023, Other items included the financial
liability resulting from put options written to non-controlling
interests of Flinks Technology Inc. (Flinks) for an amount of $27
million ($33 million as at October 31, 2022).
Note 10 - Subordinated Debt
Redemption of Subordinated Debt
On February 1, 2023, the Bank redeemed $750 million of
medium-term notes maturing on February 1, 2028 at a price equal to
their nominal value plus accrued interest.
Note 11 - Share Capital and Other Equity Instruments
Shares and Other Equity Instruments Outstanding
As at October 31,
As at July 31, 2023 2022
------------------------------------- --------------------- ---------------------
Number
of shares Shares Number Shares
or LRCN or LRCN of shares or LRCN
(1) $ or LRCN $
------------------------------------- ----------- -------- ----------- --------
First Preferred Shares
Series 30 14,000,000 350 14,000,000 350
Series 32 12,000,000 300 12,000,000 300
Series 38 16,000,000 400 16,000,000 400
Series 40 12,000,000 300 12,000,000 300
Series 42 12,000,000 300 12,000,000 300
-------------------------------------- ----------- -------- ----------- --------
66,000,000 1,650 66,000,000 1,650
------------------------------------- ----------- -------- ----------- --------
Other equity instruments
LRCN - Series 1 500,000 500 500,000 500
LRCN - Series 2 500,000 500 500,000 500
LRCN - Series 3 500,000 500 500,000 500
-------------------------------------- ----------- -------- ----------- --------
1,500,000 1,500 1,500,000 1,500
------------------------------------- ----------- -------- ----------- --------
Preferred shares and other equity
instruments 67,500,000 3,150 67,500,000 3,150
--------------------------------------- ----------- -------- ----------- --------
Common shares at beginning of fiscal
year 336,582,124 3,196 337,912,283 3,160
Issued pursuant to the Stock Option
Plan 1,538,861 86 1,193,663 61
Repurchases of common shares for
cancellation - - (2,500,000) (24)
Impact of shares purchased or sold
for trading(2) 115,119 12 (18,295) (1)
Other (7,791) - (5,527) -
--------------------------------------- ----------- -------- ----------- --------
Common shares at end of period 338,228,313 3,294 336,582,124 3,196
--------------------------------------- ----------- -------- -----------
(1) Limited Recourse Capital Notes (LRCN).
(2) As at July 31, 2023, a total of 109,869 shares were sold
short for trading, representing $12 million ( 5,250 shares were
held for trading, representing a negligible amount as at October
31, 2022).
Note 11 - Share Capital and Other Equity Instruments (cont.)
Dividends Declared and Distributions on Other Equity
Instruments
Nine months ended
July 31
---------------------------------- ---------- ------------------------
2023 2022
Dividends Dividends
or interest Dividends or interest Dividends
$ per share $ per share
---------------------------------- ---------- ----------
First Preferred Shares
Series 30 11 0.7547 10 0.7547
Series 32 9 0.7198 9 0.7198
Series 38 21 1.3176 13 0.8344
Series 40 11 0.9386 11 0.8625
Series 42 11 0.9281 11 0.9281
------------ ---------- ------------ ----------
63 54
---------------------------------- ------------ ------------
Other equity instruments
LRCN - Series 1(1) 15 16
LRCN - Series 2(2) 15 15
LRCN - Series 3(3) 29 -
59 31
---------------------------------- ------------ ------------
Preferred shares and other equity
instruments 122 85
------------ ------------
Common shares 999 2.9600 897 2.6600
1,121 982
---------------------------------- ------------ ---------- ------------ ----------
(1) The LRCN - Series 1 bear interest at a fixed rate of 4.30% per annum.
(2) The LRCN - Series 2 bear interest at a fixed rate of 4.05% per annum.
(3) The LRCN - Series 3 bear interest at a fixed rate of 7.50% per annum.
Repurchase of Common Shares
On December 12, 2022, the Bank began a normal course issuer bid
to repurchase for cancellation up to 7,000,000 common shares
(representing approximately 2.1% of its outstanding common shares)
over the 12-month period ending on December 11, 2023. On December
10, 2021, the Bank had begun a normal course issuer bid to
repurchase for cancellation up to 7,000,000 common shares
(representing approximately 2% of its then outstanding common
shares) over the 12-month period ended December 9, 2022. Any
repurchase through the Toronto Stock Exchange will be done at
market prices. The common shares may also be repurchased through
other means authorized by the Toronto Stock Exchange and applicable
regulations, including private agreements or share repurchase
programs under issuer bid exemption orders issued by the securities
regulators. A private purchase made under an exemption order issued
by a securities regulator will be done at a discount to the
prevailing market price. The amounts that are paid above the
average book value of the common shares are charged to Retained
earnings. During the nine-month period ended July 31, 2023, the
Bank did not repurchase any common shares. During the nine-month
period ended July 31, 2022, the Bank had repurchased 2,500,000
common shares for $245 million, which had reduced Common share
capital by $24 million and Retained earnings by $221 million.
Note 12 - Capital Disclosure
The Bank and all other major Canadian banks have to maintain the
following minimum capital ratios established by OSFI: a CET1
capital ratio of at least 11.0%, a Tier 1 capital ratio of at least
12.5%, and a Total capital ratio of at least 14.5%. All of these
ratios include a capital conservation buffer of 2.5% established by
the Basel Committee on Banking Supervision and OSFI, a 1.0%
surcharge applicable solely to Domestic Systemically Important
Banks (D-SIBs), and a 3.0% domestic stability buffer. On December
8, 2022, OSFI expanded the domestic stability buffer range, setting
it at 0% to 4.0% instead of the previous range of 0% to 2.5%, and
it announced that the domestic stability buffer would rise from
2.5% to 3.0% effective February 1, 2023. On June 20, 2023, OSFI
announced that the domestic stability buffer will rise from 3.0% to
3.5% effective November 1, 2023. The domestic stability buffer must
consist exclusively of CET1 capital. A D--SIB that fails to meet
this buffer requirement will not be subject to automatic
constraints to reduce capital distributions but must provide a
remediation plan to OSFI. Banks also have to meet the requirements
of an updated capital output floor calculated under the Basel III
revised Standardized Approach . If the capital requirement is less
than 65.0% of the capital output floor requirement calculated using
the Basel III revised Standardized Approach, the difference is
added to the total risk-weighted assets. Lastly, OSFI requires
D-SIBs to maintain a Basel III leverage ratio of at least 3.5%.
Effective February 1, 2023, OSFI increased the leverage ratio
minimum requirement by imposing a Tier 1 capital buffer of 0.5%
applicable only to D-SIBs.
OSFI also requires D-SIBs to maintain a risk-based total
loss-absorbing capacity (TLAC) ratio of at least 24.5% (including
the domestic stability buffer) of risk-weighted assets and a TLAC
leverage ratio of at least 7.25% ( increased by 0.5% effective
February 1, 2023) . The purpose of TLAC is to ensure that a D-SIB
has sufficient loss-absorbing capacity to support its internal
recapitalization in the unlikely event it becomes non-viable.
In the second quarter of 2023, the Bank implemented OSFI's
finalized guidance relating to the Basel III reforms, consisting
primarily of:
-- a revised Standardized Approach and Internal Ratings-Based (IRB) Approach for credit risk;
-- a revised Standardized Approach for operational risk;
-- a revised capital output floor;
-- a revised Leverage Ratio Framework; and
-- revised Pillar 3 disclosure requirements.
The Basel III reforms also affected the market risk and credit
valuation adjustment (CVA) risk frameworks, which will be
implemented in the first quarter of 2024.
During the quarter and nine-month period ended July 31, 2023,
the Bank was compliant with all of OSFI's regulatory capital,
leverage, and TLAC requirements.
Note 12 - Capital Disclosure (cont.)
Regulatory Capital (1) , Leverage Ratio (1) and TLAC (2)
As at July As at October
31, 2023 31, 2022
---------- -------------
Capital
CET1 16,259 14,818
Tier 1 19,408 17,961
Total 20,409 19,727
---------- -------------
Risk-weighted assets 120,562 116,840
Total exposure 458,293 401,780
---------- -------------
Capital ratios
CET1 13.5 % 12.7%
Tier 1 16.1 % 15.4%
Total 16.9 % 16.9%
---------- -------------
Leverage ratio 4.2 % 4.5%
Available TLAC 36,015 32,351
TLAC ratio 29.9 % 27.7%
TLAC leverage ratio 7.9 % 8.1%
---------- -------------
(1) Capital, risk-weighted assets, total exposure, the capital
ratios, and the leverage ratio are calculated in accordance with
the Basel III rules, as set out in OSFI's Capital Adequacy
Requirements Guideline and Leverage Requirements Guideline. The
calculation of the figures as at October 31, 2022 had included the
transitional measure applicable to expected credit loss
provisioning and the temporary measure regarding the exclusion of
central bank reserves implemented by OSFI in response to the
COVID-19 pandemic. These provisions ceased to apply on November 1,
2022 and April 1, 2023, respectively.
(2) Available TLAC, the TLAC ratio, and the TLAC leverage ratio
are calculated in accordance with OSFI's Total Loss Absorbing
Capacity Guideline.
Note 13 - Share-Based Payments
Stock Option Plan
During the quarters ended July 31, 2023 and 2022, the Bank did
not award any stock options. During the nine-month period ended
July 31, 2023, the Bank awarded 1,416,060 stock options (1,771,588
stock options during the nine-month period ended July 31, 2022)
with an average fair value of $14.76 per option ($13.24 in
2022).
As at July 31, 2023, there were 11,696,319 stock options
outstanding (11,861,749 stock options as at October 31, 2022).
The average fair value of the options awarded was estimated on
the award date using the Black-Scholes model as well as the
following assumptions.
Nine months ended July
31
------------------------
2023 2022
Risk-free interest rate 3.25% 1.79%
Expected life of options 7 years 7 years
Expected volatility 23.13% 22.68%
Expected dividend yield 4.23% 3.88%
During the quarter ended July 31, 2023, a $5 million
compensation expense was recorded for this plan ($4 million for the
quarter ended July 31, 2022). During the nine-month period ended
July 31, 2023, a $14 million compensation expense was recorded for
this plan ($12 million for the nine-month period ended July 31,
2022).
Note 14 - Employee Benefits - Pension Plans and Other
Post-Employment Benefit Plans
The Bank offers pension plans that have a defined benefit
component and a defined contribution component. The Bank also
offers other post-employment benefit plans to eligible employees.
The cost associated with these plans, including the remeasurements
recognized in Other comprehensive income, is presented in the
following table.
Cost for Pension Plans and Other Post-Employment Benefit
Plans
Quarter ended July
31
Other post-employment
Pension plans benefit plans
---------------
2023 2022 2023 2022
-------- ----- ----------- ----------
Current service cost 23 31 - -
Interest expense (income), net (6) (5) 1 2
Administrative costs 1 1
-------- -----
Expense of the defined benefit component 18 27 1 2
Expense of the defined contribution component 3
--------
Expense recognized in Net income 21 27 1 2
-------- ----- ----------- ----------
Remeasurements (1)
Actuarial (gains) losses on defined
benefit obligation (161) 84 (3) 2
Return on plan assets(2) 219 (30)
-------- -----
Remeasurements recognized in Other comprehensive
income 58 54 (3) 2
-------- ----- ----------- ----------
79 81 (2) 4
-------- ----- ----------- ----------
Nine months ended
July 31
------------------------------------------------- ---- -------
Pension Other post-employment
plans benefit plans
------- -----------------------
2023 2022 2023 2022
------------------------------------------------- ---- ------- ----------- ----------
Current service cost 69 93 - -
Interest expense (income), net (18) (15) 4 4
Administrative costs 3 3
---- -------
Expense of the defined benefit component 54 81 4 4
Expense of the defined contribution component 7
----
Expense recognized in Net income 61 81 4 4
---- ------- ----------- ----------
Remeasurements (1)
Actuarial (gains) losses on defined
benefit obligation 201 (826) 4 (21)
Return on plan assets(2) (82) 669
-------------------------------------------------- ---- -------
Remeasurements recognized in Other comprehensive
income 119 (157) 4 (21)
---- ------- ----------- ----------
180 (76) 8 (17)
------------------------------------------------- ---- ------- ----------- ----------
(1) Changes related to the discount rate and to the return on
plan assets are reviewed and updated on a quarterly basis. All
other assumptions are updated annually.
(2) Excludes interest income.
Note 15 - Income Taxes
Notice of Assessment
In March 2023, the Bank was reassessed by the Canada Revenue
Agency (CRA) for additional income tax and interest of
approximately $90 million (including estimated provincial tax and
interest) in respect of certain Canadian dividends received by the
Bank during the 2018 taxation year.
In prior fiscal years, the Bank had been reassessed for
additional income tax and interest of approximately $875 million
(including provincial tax and interest) in respect of certain
Canadian dividends received by the Bank during the 2012-2017
taxation years.
In the reassessments, the CRA alleges that the dividends were
received as part of a "dividend rental arrangement".
The CRA may issue reassessments to the Bank for taxation years
subsequent to 2018 in regard to certain activities similar to those
that were the subject of the above-mentioned reassessments. The
Bank remains confident that its tax position was appropriate and
intends to vigorously defend its position. As a result, no amount
has been recognized in the consolidated financial statements as at
July 31, 2023.
Canadian Government's 2022 Tax Measures
On November 4, 2022, the Government of Canada introduced Bill
C-32 - An Act to implement certain provisions of the fall economic
statement tabled in Parliament on November 3, 2022 and certain
provisions of the budget tabled in Parliament on April 7, 2022 to
implement tax measures applicable to certain entities of banking
and life insurer groups, as presented in its April 7, 2022 budget.
These tax measures include the Canada Recovery Dividend (CRD),
which is a one-time, 15% tax on the fiscal 2021 and 2020 average
taxable income above $1 billion, as well as a 1.5% increase in the
statutory tax rate. On December 15, 2022, Bill C-32 received royal
assent. Given that these tax measures were in effect at the
financial reporting date, a $32 million tax expense for the CRD and
an $8 million tax recovery for the tax rate increase, including the
impact related to current and deferred taxes for fiscal 2022, were
recognized in the consolidated financial statements as at July 31,
2023.
Proposed Legislation
In its March 28, 2023 budget, the Government of Canada proposed
to introduce certain tax measures applicable to the Bank. The
measures include the denial of the deduction in respect of
dividends received after 2023 on shares that are mark-to-market
property for tax purposes, the application of a 2% tax on the net
value of equity repurchases occurring as of January 1, 2024, as
well as the government's intention to implement the Pillar Two
rules (global minimum tax) published by the Organization for
Economic Co-operation and Development (OECD) for fiscal years
beginning as of December 31, 2023. The proposed measures have not
yet been included in a bill at the reporting date.
Note 16 - Earnings Per Share
Diluted earnings per share is calculated by dividing net income
attributable to common shareholders by the weighted average number
of common shares outstanding after taking into account the dilution
effect of stock options using the treasury stock method and any
gain (loss) on the redemption of preferred shares.
Quarter ended July Nine months ended
31 July 31
2023 2022(1) 2023 2022(1)
--------- --------- --------
Basic earnings per share
Net income attributable to the Bank's shareholders
and holders of other equity instruments 840 826 2,569 2,646
Dividends on preferred shares and distributions
on other equity instruments 36 26 106 77
Net income attributable to common shareholders 804 800 2,463 2,569
Weighted average basic number of common
shares outstanding (thousands) 337,916 336,437 337,468 337,290
--------- --------- --------
Basic earnings per share (dollars) 2.38 2.38 7.30 7.61
--------- --------- --------
Diluted earnings per share
Net income attributable to common shareholders 804 800 2,463 2,569
--------- --------- --------
Weighted average basic number of common
shares outstanding (thousands) 337,916 336,437 337,468 337,290
Adjustment to average number of common shares
(thousands)
Stock options(2) 3,294 3,438 3,223 3,904
--------- --------- --------
Weighted average diluted number of common
shares outstanding (thousands) 341,210 339,875 340,691 341,194
--------- --------- --------
Diluted earnings per share (dollars) 2.36 2.35 7.23 7.53
--------- --------- --------
(1) For the quarter and nine-month period ended July 31, 2022,
certain amounts have been adjusted to reflect a change in
accounting policy related to cloud computing arrangements. For
additional information, see Note 1.
(2) For the quarter and nine-month period ended July 31, 2023,
as the exercise price of the options was lower than the average
price of the Bank's common shares, no options were excluded from
the diluted earnings per share calculation. For the quarter ended
July 31, 2022, the calculation of diluted earnings per share
excluded an average number of 1,754,559 options outstanding with a
weighted average exercise price of $96.35, given that the exercise
price of these options was greater than the average price of the
Bank's common shares. For the nine-month period ended July 31,
2022, the calculation of diluted earnings per share excluded an
average number of 1,514,677 options outstanding with a weighted
average exercise price of $96.35.
Note 17 - Segment Disclosures
The Bank carries out its activities in four business segments,
which are defined below. For presentation purposes, other
activities are grouped in the Other heading. Each reportable
segment is distinguished by services offered, type of clientele,
and marketing strategy. The presentation of segment disclosures is
consistent with the presentation adopted by the Bank for the fiscal
year beginning November 1, 2022. This presentation reflects a
revision to the method used for the sectoral allocation of
technology investment expenses , which are now immediately
allocated to the various business segments, whereas certain
expenses , notably costs incurred during the research phase of
projects , had previously been recorded in the Other heading of
segment results. This revision is consistent with the accounting
policy change applied in fiscal 2022 related to cloud computing
arrangements. For the quarter and nine-month period ended July 31,
2022 , certain amounts have been adjusted to reflect this
accounting policy change (for additional information, see Note
1).
Personal and Commercial
The Personal and Commercial segment encompasses the banking,
financing, and investing services offered to individuals, advisors,
and businesses as well as insurance operations.
Wealth Management
The Wealth Management segment comprises investment solutions,
trust services, banking services, lending services, and other
wealth management solutions offered through internal and
third-party distribution networks.
Financial Markets
The Financial Markets segment encompasses corporate banking and
investment banking and financial solutions for large and mid-size
corporations, public sector organizations, and institutional
investors.
U.S. Specialty Finance and International (USSF&I)
The USSF&I segment encompasses the specialty finance
expertise provided by the Credigy subsidiary; the activities of the
ABA Bank subsidiary, which offers financial products and services
to individuals and businesses in Cambodia; and the activities of
targeted investments in certain emerging markets.
Other
This heading encompasses treasury activities; liquidity
management; Bank funding; asset/liability management activities;
the activities of the Flinks subsidiary, a fintech company
specialized in financial data aggregation and distribution; certain
specified items; and the unallocated portion of corporate
units.
Quarter ended July 31(1)
----------------
Personal
and Wealth Financial
Commercial Management Markets USSF&I Other Total
---------------- ----------------
2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
-----------------
Net interest
income(2) 837 741 192 161 (311) 392 273 266 (121) (141) 870 1,419
Non-interest
income(2)(3) 303 302 437 430 871 219 19 7 15 36 1,645 994
-----------------
Total revenues 1,140 1,043 629 591 560 611 292 273 (106) (105) 2,515 2,413
Non-interest
expenses(4) 613 560 375 351 272 254 100 86 57 54 1,417 1,305
-----------------
Income before
provisions
for credit
losses and
income
taxes 527 483 254 240 288 357 192 187 (163) (159) 1,098 1,108
Provisions for
credit
losses 75 49 1 1 5 (23) 29 29 1 1 111 57
-----------------
Income before
income
taxes (recovery) 452 434 253 239 283 380 163 158 (164) (160) 987 1,051
Income taxes
(recovery)(2) 124 115 70 64 78 101 35 33 (159) (88) 148 225
-----------------
Net income 328 319 183 175 205 279 128 125 (5) (72) 839 826
Non-controlling
interests - - - - - - - - (1) - (1) -
-----------------
Net income
attributable
to the Bank's
shareholders
and holders of
other
equity
instruments 328 319 183 175 205 279 128 125 (4) (72) 840 826
Average assets(5) 148,934 142,241 8,702 8,518 186,236 149,653 23,589 18,941 66,660 72,613 434,121 391,966
-----------------
Total assets 150,699 144,911 8,697 8,855 181,712 147,428 23,564 19,188 61,343 66,451 426,015 386,833
Nine months ended July 31(1)
Personal
and Wealth Financial
Commercial Management Markets USSF&I Other Total
-----------------
2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
------------------
Net interest
income(6) 2,464 2,080 590 407 (614) 1,145 841 813 (430) (381) 2,851 4,064
Non-interest
income(3)(6) 900 883 1,293 1,355 2,535 760 55 30 (58) 226 4,725 3,254
------------------
Total revenues 3,364 2,963 1,883 1,762 1,921 1,905 896 843 (488) (155) 7,576 7,318
Non-interest
expenses(4) 1,820 1,667 1,111 1,068 842 775 296 254 125 120 4,194 3,884
------------------
Income before
provisions
for credit
losses and income
taxes 1,544 1,296 772 694 1,079 1,130 600 589 (613) (275) 3,382 3,434
Provisions for
credit
losses 173 55 1 1 15 (55) 90 56 3 1 282 58
------------------
Income before
income
taxes (recovery) 1,371 1,241 771 693 1,064 1,185 510 533 (616) (276) 3,100 3,376
Income taxes
(recovery)(6)(7) 377 329 212 185 293 314 107 108 (456) (205) 533 731
------------------
Net income 994 912 559 508 771 871 403 425 (160) (71) 2,567 2,645
Non-controlling
interests - - - - - - - - (2) (1) (2) (1)
------------------
Net income
attributable
to the Bank's
shareholders
and
holders of other
equity
instruments 994 912 559 508 771 871 403 425 (158) (70) 2,569 2,646
Average assets(5) 147,462 138,670 8,582 8,394 176,575 152,183 22,586 18,383 71,616 70,833 426,821 388,463
------------------
Total assets 150,699 144,911 8,697 8,855 181,712 147,428 23,564 19,188 61,343 66,451 426,015 386,833
(1) For the quarter and nine-month period ended July 31, 2022,
certain amounts have been reclassified, notably due to a revised
method for the sectoral allocation of technology investment
expenses. In addition, certain amounts have been adjusted to
reflect a change in accounting policy related to cloud computing
arrangements (for additional information, see Note 1).
(2) The Net interest income, Non-interest income, and Income
taxes (recovery) items of the business segments are presented on a
taxable equivalent basis. Taxable equivalent basis is a calculation
method that consists of grossing up certain revenues taxed at lower
rates by the income tax to a level that would make it comparable to
revenues from taxable sources in Canada. For the business segments
as a whole, Net interest income was grossed up by $88 million ($60
million in 2022), Non-interest income was grossed up by $64 million
($11 million in 2022), and an equivalent amount was recognized in
Income taxes (recovery). The effect of these adjustments is
reversed under the Other heading.
(3) During the quarter and nine-month period ended July 31,
2023, the Bank concluded that it had lost significant influence
over TMX and therefore ceased using the equity method to account
for this investment. The Bank designated its investment in TMX as a
financial asset measured at fair value through other comprehensive
income in an amount of $191 million. Upon the fair value
measurement, a $91 million gain ($67 million net of income taxes)
was recorded in the Non-interest income item of the Other
heading.
(4) During the quarter and nine-month period ended July 31,
2023, the Non-interest expenses item of the Other heading included
an expense of $25 million ($18 million net of income taxes) related
to the retroactive impact of the changes to the Excise Tax Act,
indicating that payment card clearing services rendered by a
payment card network operator are subject to the goods and services
tax (GST) and the harmonized sales tax (HST).
(5) Represents an average of the daily balances for the period,
which is also the basis on which sectoral assets are reported in
the business segments.
(6) During the nine-month period ended July 31, 2023, for the
business segments as a whole, Net interest income was grossed up by
$242 million ($169 million in 2022), Non-interest income was
grossed up by $172 million ($18 million in 2022), and an equivalent
amount was recognized in Income taxes (recovery). The effect of
these adjustments is reversed under the Other heading.
(7) During the nine-month period ended July 31, 2023, the Bank
recorded a $32 million tax expense with respect to the Canada
Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and
2020 average taxable income above $1 billion, as well as an $8
million tax recovery related to a 1.5% increase in the statutory
tax rate, which includes the impact related to current and deferred
taxes for fiscal 2022. These items are recorded in the Other
heading. For additional information on these tax measures, see Note
15.
Information for Shareholders and Investors
Investor Relations
Financial analysts and investors who want to obtain financial
information on the Bank may contact the Investor Relations
Department.
600 De La Gauchetière Street West, 7(th) Floor
Montreal, Quebec H3B 4L2
Toll-free: 1-866-517-5455
Email: investorrelations@nbc.ca
Website: nbc.ca/investorrelations
Communications and Corporate Social Responsibility
600 De La Gauchetière Street West, 18(th) Floor
Montreal, Quebec H3B 4L2
Telephone: 514-394-8644
Email: pa@nbc.ca
Quarterly Report Publication Dates for Fiscal 2023
(subject to approval by the Board of Directors of the Bank)
First quarter March 1
Second quarter May 31
Third quarter August 30
Fourth quarter December 1
Disclosure of
Third Quarter 2023 Results
Conference Call
* A conference call for analysts and institutional
investors will be held on Wednesday, August 30, 2023
at 1:00 p.m. EDT.
* Access by telephone in listen-only mode:
1-800-806-5484 or
416-340-2217 . The access code is
8890472 # .
* A recording of the conference call can be heard until
November 30, 2023 by dialing 1-800-408-3053 or
905-694-9451. The access code is 4566460#.
Webcast
* The conference call will be webcast live at
nbc.ca/investorrelations .
* A recording of the webcast will also be available on
National Bank's website after the call.
Financial Documents
* The Report to Shareholders (which includes the
quarterly consolidated financial statements) is
available at all times on National Bank's website at
nbc.ca/investorrelations .
* The Report to Shareholders, the Supplementary
Financial Information, the Supplementary Regulatory
Capital and Pillar 3 Disclosure, and a slide
presentation will be available on the Investor
Relations page of National Bank's website on the
morning of the day of the conference call.
Transfer Agent and Registrar
For information about stock transfers, address changes,
dividends, lost certificates, tax forms, and estate transfers,
shareholders of record may contact the transfer agent,
Computershare Trust Company of Canada, at the address or telephone
number below.
Computershare Trust Company of Canada
Share Ownership Management
100 University Avenue, 8(th) Floor
Toronto, Ontario M5J 2Y1
Telephone: 1-888-838-1407
Fax: 1-888-453-0330
Email: service@computershare.com
Website: computershare.com
Shareholders whose shares are held by a market intermediary are
asked to contact the market intermediary concerned.
Direct Deposit Service for Dividends
Shareholders may elect to have their dividend payments deposited
directly via electronic funds transfer to their bank account at any
financial institution that is a member of the Canadian Payments
Association. To do so, they must send a written request to the
transfer agent, Computershare Trust Company of Canada.
Dividend Reinvestment and Share Purchase Plan
National Bank has a Dividend Reinvestment and Share Purchase
Plan for holders of its common and preferred shares under which
they can acquire common shares of the Bank without paying
commissions or administration fees. P articipants acquire common
shares through the reinvestment of cash dividends paid on the
shares they hold or through optional cash payments of at least $1
per payment, up to a maximum of $5,000 per quarter.
For additional information, shareholders may contact National
Bank's registrar and transfer agent, Computershare Trust Company of
Canada, at 1--888--838--1407. To participate in the plan, National
Bank's beneficial or non-registered common shareholders must
contact their financial institution or broker.
Dividends
Dividends paid are "eligible dividends" in accordance with the
Income Tax Act (Canada).
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END
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