TIDM32SS
RNS Number : 4390V
National Bank of Canada
01 December 2023
Regulatory Announcement
Q4 2023 Results
National Bank of Canada (the "Bank") announces publication of
its Fourth Quarter 2023 Release. The Fourth Quarter Results have
been uploaded to the National Storage Mechanism and will shortly be
available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
and are available on the Bank's website at
https://www.nbc.ca/about-us/investors/quarterly-results.html
To view the full PDF of this Fourth Quarter 2023 Release, please
click on the following link:
http://www.rns-pdf.londonstockexchange.com/rns/4390V_1-2023-12-1.pdf
National Bank reports its 2023 fourth-quarter
and annual results and raises its quarterly dividend by 4
cents
to $1.06 per share
The financial information reported in this document is based on
the unaudited interim condensed consolidated financial statements
for the fourth quarter of fiscal 2023 and on the audited annual
consolidated financial statements for the year ended October 31,
2023 and is prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB), unless otherwise indicated. IFRS
represent Canadian generally accepted accounting principles (GAAP).
All amounts are presented in Canadian dollars.
MONTREAL, December 1, 2023 - For the fourth quarter of 2023,
National Bank is reporting net income of $768 million, up 4% from
$738 million in the fourth quarter of 2022. Fourth -quarter diluted
earnings per share stood at $2.14 compared to $2.08 in the fourth
quarter of 2022. These fourth-quarter increases were driven by
year-over-year growth in total revenues in all the business
segments, partly offset by higher non-interest expenses and higher
provisions for credit losses. As for fourth-quarter adjusted net
income(1) , which excludes specified items, it totalled $867
million, rising 17% year over year from $738 million, while
fourth-quarter adjusted diluted earnings per share(1) stood at
$2.44 versus $2.08 in the fourth quarter of 2022.
For the year ended October 31, 2023, the Bank's net income
totalled $3,335 million, down 1% from $3,383 million in fiscal
2022, and its diluted earnings per share stood at $9.38 in fiscal
2023 versus $9.61 in fiscal 2022. Revenue growth in all of the
business segments was more than offset by higher non-interest
expenses (partly due to the specified items(1) recorded during
fiscal 2023) and by notably higher provisions for credit losses.
The fiscal 2023 income before provisions for credit losses and
income taxes was down 1% compared to fiscal 2022. As for adjusted
net income(1) in fiscal 2023, it totalled $3,409 million, up 1%
from $3,383 million in fiscal 2022, while adjusted diluted earnings
per share(1) stood at $9.60 versus $9.61 in fiscal 2022. The fiscal
2023 specified items(1) had a $74 million unfavourable impact on
net income in fiscal 2023. As for adjusted income before provisions
for credit losses and income taxes(1) , it rose 7% year over
year.
"Through strong execution, organic growth, and tight expense
management, we delivered solid financial results, generated an
excellent return on equity, and maintained robust capital levels in
2023," said Laurent Ferreira, President and Chief Executive Officer
of National Bank of Canada. He added, "As we enter 2024, we remain
committed to our prudent and disciplined approach to capital,
credit and cost management. Our defensive posture, coupled with the
earnings power of our diversified business mix, positions us well
to create sustainable long-term value for our stakeholders in an
environment where the outlook for economic growth remains
challenging."
Highlights
(millions of Canadian Quarter ended October Year ended October
dollars) 31 31
------------------------- --- --- ---------------------------- -------------------------------------
2023 2022 % Change 2023 2022 % Change
-------------------------------- ---- ---- -------- ------- ------- --------
Net income 768 738 4 3,335 3,383 (1)
Diluted earnings per
share (dollars) $ 2.14 $2.08 3 $ 9.38 $ 9.61 (2)
Return on common
shareholders'
equity(2) 14.4% 15.3% 16.5 % 18.8%
Dividend payout ratio(2) 42.0% 36.8% 42.0 % 36.8%
------------------------- ------- ---- ---- -------- ------- ------- --------
Operating results -
Adjusted
(1)
Net income - Adjusted 867 738 17 3,409 3,383 1
Diluted earnings per
share - Adjusted
(dollars) $ 2.44 $2.08 17 $ 9.60 $ 9.61 -
Return on common
shareholders'
equity - Adjusted(3) 16.3% 15.3% 16.8 % 18.8%
Dividend payout ratio -
Adjusted(3) 41.1% 36.8% 41.1 % 36.8%
------------------------- ------- ---- ---- -------- ------- ------- --------
As at
October
31, As at
October
2023 31, 2022
--- -------------------- --- --- ---- ---- -------- ----------- ----------- --------
CET1 capital ratio under
Basel
III(4) 13.5 % 12.7%
Leverage ratio under
Basel III(4) 4.4 % 4.5%
------------------------- ------- ---- ---- -------- ------- ------- --------
(1) See the Financial Reporting Method section on pages 2 to 5
for additional information on non-GAAP financial measures.
(2) For additional information on the composition of these
measures, see the Glossary section on pages 124 to 127 of the
Bank's 2023 Annual Report, which is available on the Bank's website
at nbc.ca or the SEDAR+ website at sedarplus.ca.
(3) For additional information on non-GAAP ratios, see the
Financial Reporting Method section on pages 14 to 19 of the Bank's
2023 Annual Report, which is available on the Bank's website at
nbc.ca or the SEDAR+ website at sedarplus.ca.
(4) For additional information on capital management measures,
see the Financial Reporting Method section on pages 14 to 19 of the
Bank's 2023 Annual Report, which is available on the Bank's website
at nbc.ca or the SEDAR+ website at sedarplus.ca.
Financial Reporting Method
The Bank's consolidated financial statements are prepared in
accordance with IFRS, as issued by the IASB. The financial
statements also comply with section 308(4) of the Bank Act
(Canada), which states that, except as otherwise specified by the
Office of the Superintendent of Financial Institutions (Canada) (
OSFI), the consolidated financial statements are to be prepared in
accordance with IFRS, which represent Canadian GAAP. None of the
OSFI accounting requirements are exceptions to IFRS.
The presentation of segment disclosures is consistent with the
presentation adopted by the Bank for the fiscal year beginning
November 1, 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 related to cloud
computing arrangements applied in fiscal 2022. For the quarter and
fiscal 2022, certain amounts in the Results by Segment section were
adjusted to reflect this revision.
Non-GAAP and Other Financial Measures
The Bank uses a number of financial measures when assessing its
results and measuring overall performance. Some of these financial
measures are not calculated in accordance with GAAP. Regulation
52-112 Respecting Non-GAAP and Other Financial Measures Disclosure
(Regulation 52-112) prescribes disclosure requirements that apply
to the following measures used by the Bank:
-- non-GAAP financial measures;
-- non-GAAP ratios;
-- supplementary financial measures;
-- capital management measures.
Non-GAAP Financial Measures
The Bank uses non-GAAP financial measures that do not have
standardized meanings under GAAP and that therefore may not be
comparable to similar measures used by other companies. Presenting
non-GAAP financial measures helps readers to better understand how
management analyzes results, shows the impacts of specified items
on the results of the reported periods, and allows readers to
better assess results without the specified items if they consider
such items not to be reflective of the underlying performance of
the Bank's operations. In addition, like many other financial
institutions, the Bank uses the taxable equivalent basis to
calculate net interest income, non-interest income, and income
taxes. This calculation method consists of grossing up certain
revenues taxed at lower rates (notably dividends) by the income tax
to a level that would make it comparable to revenues from taxable
sources in Canada. An equivalent amount is added to income taxes.
This adjustment is necessary in order to perform a uniform
comparison of the return on different assets irrespective of their
tax treatment.
A quantitative reconciliation of non-GAAP financial measures is
presented in the Reconciliation of Non-GAAP Financial Measures
tables on pages 3 to 5. Note that, for the quarter ended October
31, 2023, the following items were excluded from results: $86
million in impairment losses ($62 million net of income taxes) on
intangible assets and premises and equipment, $35 million in
litigation expenses ($26 million net of income taxes), and $15
million in provisions for contracts ($11 million net of income
taxes). Also, for the year ended October 31, 2023, the following
items were excluded from results: a gain of $91 million on the fair
value remeasurement of an equity interest ($67 million net of
income taxes), an expense of $25 million ($18 million net of income
taxes) related to the retroactive impact of changes to the Excise
Tax Act, and a $24 million income tax expense related to the
Canadian government's 2022 tax measures. No specified items had
been excluded from results for the quarter and year ended October
31, 2022.
For additional information on non-GAAP financial measures,
non-GAAP ratios, supplementary financial measures, and capital
management measures, see the Financial Reporting Method section and
the Glossary section, on pages 14 to 19 and 124 to 127,
respectively, of the Bank's 2023 Annual Report, which is available
on the Bank's website at nbc.ca or the SEDAR+ website at
sedarplus.ca.
Reconciliation of Non-GAAP Financial Measures
Presentation of Results - Adjusted
Quarter ended
(millions of Canadian dollars) October 31
-------------------------------- --------------- ----------- --------- ------ -------------------
2023 2022
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Personal Wealth Financial
and Commercial Management Markets USSF&I Other Total Total
------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Net interest income 857 188 (527) 291 (74) 735 1,207
Taxable equivalent - - 87 - 3 90 65
Net interest income - Adjusted 857 188 (440) 291 (71) 825 1,272
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Non-interest income 295 450 1,100 22 (8) 1,859 1,127
Taxable equivalent - - 75 - - 75 30
Non-interest income - Adjusted 295 450 1,175 22 (8) 1,934 1,157
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Total revenues - Adjusted 1,152 638 735 313 (79) 2,759 2,429
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Non-interest expenses 690 423 319 106 69 1,607 1,346
Impairment losses on intangible
assets and premises and
equipment(1) (59) (8) (7) - (12) (86) -
Litigation expenses(2) - (35) - - - (35) -
Provisions for contracts(3) (9) - - - (6) (15) -
Non-interest expenses - Adjusted 622 380 312 106 51 1,471 1,346
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Income before provisions for
credit
losses and income taxes -
Adjusted 530 258 423 207 (130) 1,288 1,083
Provisions for credit losses 65 1 24 23 2 115 87
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Income before income taxes -
Adjusted 465 257 399 184 (132) 1,173 996
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Income taxes 109 59 (54) 39 (49) 104 163
Taxable equivalent - - 162 - 3 165 95
Income taxes on impairment
losses
on intangible assets and
premises
and equipment(1) 17 2 2 - 3 24 -
Income taxes on litigation
expenses(2) - 9 - - - 9 -
Income taxes on provisions for
contracts(3) 2 - - - 2 4 -
Income taxes - Adjusted 128 70 110 39 (41) 306 258
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Net income - Adjusted 337 187 289 145 (91) 867 738
Specified items after income
taxes (49) (32) (5) - (13) (99) -
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Net income 288 155 284 145 (104) 768 738
Non-controlling interests - - - - - - -
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Net income attributable to the
Bank ' s shareholders
and holders of other equity
instruments 288 155 284 145 (104) 768 738
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Net income attributable to the
Bank ' s shareholders
and holders of other equity
instruments
- Adjusted 337 187 289 145 (91) 867 738
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Dividends on preferred shares
and
distributions on
limited recourse capital notes 35 30
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
Net income attributable to
common
shareholders - Adjusted 832 708
-------------------------------- --------------- ----------- --------- ------ ----- ----- -----
(1) For the quarter ended October 31, 2023, the Bank recorded
$75 million in intangible asset impairment losses ($54 million net
of income taxes) on technology development for which the Bank has
decided to cease its use or development, and it recorded $11
million in impairment losses on premises and equipment ($8 million
net of income taxes) related to right-of-use assets.
(2) For the quarter ended October 31, 2023, the Bank recorded
$35 million in litigation expenses ($26 million net of income
taxes) to resolve litigations and other disputes arising from
various ongoing or potential claims against the Bank.
(3) For the quarter ended October 31, 2023, the Bank recorded
$15 million in charges ($11 million net of income taxes) for
contract termination penalties and for provisions for onerous
contracts.
(millions of Canadian dollars) Year ended October 31
------------------------------- --------------- ----------- --------- ----------------------------
2023 2022
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Personal Wealth Financial
and Commercial Management Markets USSF&I Other Total Total
------------------------------ --------------- ----------- --------- ------ ----- ------ -----
Net interest income 3,321 778 (1,378) 1,132 (267) 3,586 5,271
Taxable equivalent - - 324 - 8 332 234
Net interest income - Adjusted 3,321 778 (1,054) 1,132 (259) 3,918 5,505
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Non-interest income 1,195 1,743 3,463 77 106 6,584 4,381
Taxable equivalent - - 247 - - 247 48
Gain on the fair value
remeasurement
of an equity interest(1) - - - - (91) (91) -
Non-interest income - Adjusted 1,195 1,743 3,710 77 15 6,740 4,429
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Total revenues - Adjusted 4,516 2,521 2,656 1,209 (244) 10,658 9,934
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Non-interest expenses 2,510 1,534 1,161 402 194 5,801 5,230
Impairment losses on intangible
assets and premises and
equipment(2) (59) (8) (7) - (12) (86) -
Litigation expenses(3) - (35) - - - (35) -
Expense related to changes to
the
Excise Tax Act (4) - - - - (25) (25) -
Provisions for contracts(5) (9) - - - (6) (15) -
Non-interest expenses -
Adjusted 2,442 1,491 1,154 402 151 5,640 5,230
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Income before provisions for
credit
losses and income taxes -
Adjusted 2,074 1,030 1,502 807 (395) 5,018 4,704
Provisions for credit losses 238 2 39 113 5 397 145
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Income before income taxes -
Adjusted 1,836 1,028 1,463 694 (400) 4,621 4,559
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Income taxes 486 271 (170) 146 (96) 637 894
Taxable equivalent - - 571 - 8 579 282
Income taxes on the gain on the
fair value remeasurement
of an equity interest(1) - - - - (24) (24) -
Income taxes on impairment
losses
on intangible assets and
premises
and equipment(2) 17 2 2 - 3 24 -
Income taxes on litigation
expenses(3) - 9 - - - 9 -
Income taxes on the expense
related
to changes to the Excise Tax
Act
(4) - - - - 7 7 -
Income taxes on provisions for
contracts(5) 2 - - - 2 4 -
Income taxes related to the
Canadian
government's 2022
tax measures(6) - - - - (24) (24) -
Income taxes - Adjusted 505 282 403 146 (124) 1,212 1,176
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Net income - Adjusted 1,331 746 1,060 548 (276) 3,409 3,383
Specified items after income
taxes (49) (32) (5) - 12 (74) -
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Net income 1,282 714 1,055 548 (264) 3,335 3,383
Non-controlling interests - - - - (2) (2) (1)
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Net income attributable to the
Bank ' s shareholders
and holders of other equity
instruments 1,282 714 1,055 548 (262) 3,337 3,384
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Net income attributable to the
Bank's shareholders
and holders of other equity
instruments
- Adjusted 1,331 746 1,060 548 (274) 3,411 3,384
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Dividends on preferred shares
and
distributions
on limited recourse capital
notes 141 107
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
Net income attributable to
common
shareholders - Adjusted 3,270 3,277
------------------------------- --------------- ----------- --------- ------ ----- ------ -----
(1) During the year ended October 31, 2023 , the Bank concluded
that it had lost significant influence over TMX Group Limited (TMX)
and therefore ceased using the equity method to account for this
investment. The Bank designated its investment in TMX as a
financial asset measured at fair value through other comprehensive
income in an amount of $191 million. Upon the fair value
measurement, a gain of $91 million ($67 million net of income
taxes) was recorded.
(2) During the year ended October 31, 2023, the Bank recorded
$75 million in intangible asset impairment losses ($54 million net
of income taxes) on technology development for which the Bank has
decided to cease its use or development, and it recorded $11
million in premises and equipment impairment losses ($8 million net
of income taxes) related to right-of-use assets.
(3) During the year ended October 31, 2023, the Bank recorded
$35 million in litigation expenses ($26 million net of income
taxes) to resolve litigations and other disputes arising from
ongoing or potential claims against the Bank.
(4) During the year ended October 31, 2023, the Bank recorded a
$25 million expense ($18 million net of income taxes) related to
the retroactive impact of 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) During the year ended October 31, 2023, the Bank recorded
$15 million in charges ($11 million net of income taxes) for
contract termination penalties and for provisions for onerous
contracts.
(6) During the year ended October 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 the 1.5% increase in the statutory tax
rate, which includes the impact related to current and deferred
taxes for fiscal 2022. For additional information on these tax
measures, see the Income Taxes section on page 18.
Presentation of Basic and Diluted Earnings Per Share -
Adjusted
Quarter ended Year ended October
(Canadian dollars) October 31 31
-------------------------------------------------- ------------------ ----------------------
2023 2022 2023 2022
------------------------------------------------------ ----- ----- ---------- ------
Basic earnings per share $ 2.16 $ 2.10 $ 9.47 $ 9.72
Gain on the fair value remeasurement of an
equity interest(1) - - (0.20) -
Impairment losses on intangible assets and
premises and equipment(2) 0.19 - 0.19 -
Litigation expenses(3) 0.08 - 0.08 -
Expense related to changes to the Excise
Tax Act (4) - - 0.05 -
Provisions for contracts(5) 0.03 - 0.03 -
Income taxes related to the Canadian government's
2022 tax measures(6) - - 0.07 -
-------------------------------------------------------- ----- ----- ---------- ------
Basic earnings per share - Adjusted $ 2.46 $ 2.10 $ 9.69 $ 9.72
--------------------------------------------------- ----- ----- ---------- ------
Diluted earnings per share $ 2.14 $ 2.08 $ 9.38 $ 9.61
Gain on the fair value remeasurement of an
equity interest(1) - - (0.20) -
Impairment losses on intangible assets and
premises and equipment(2) 0.19 - 0.19 -
Litigation expenses(3) 0.08 - 0.08 -
Expense related to changes to the Excise
Tax Act (4) - - 0.05 -
Provisions for contracts(5) 0.03 - 0.03 -
Income taxes related to the Canadian government's
2022 tax measures(6) - - 0.07 -
Diluted earnings per share - Adjusted $ 2.44 $ 2.08 $ 9.60 $ 9.61
--------------------------------------------------- ----- ----- ---------- ------
(1) During the year ended October 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 gain of $91
million ($67 million net of income taxes) was recorded.
(2) During the quarter and year ended October 31, 2023, the Bank
recorded $75 million in intangible asset impairment losses ($54
million net of income taxes) on technology development for which
the Bank has decided to cease its use or development, and it
recorded $11 million in premises and equipment impairment losses
($8 million net of income taxes) related to right-of-use
assets.
(3) During the quarter and year ended October 31, 2023, the Bank
recorded $35 million in litigation expenses ($26 million net of
income taxes) to resolve litigations and other disputes arising
from ongoing or potential claims against the Bank.
(4) During the year ended October 31, 2023, the Bank recorded a
$25 million expense ($18 million net of income taxes) related to
the retroactive impact of 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) During the quarter and year ended October 31, 2023, the Bank
recorded $15 million in charges ($11 million net of income taxes)
for contract termination penalties and for provisions for onerous
contracts.
(6) During the year ended October 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 the 1.5% increase in the statutory tax
rate, which includes the impact related to current and deferred
taxes for fiscal 2022. For additional information on these tax
measures, see the Income Taxes section on page 18.
Highlights
(millions of Canadian
dollars,
except per share Quarter ended October
amounts) 31 Year ended October 31
------------------------ -------------------------------- --------- ---------------------------------------------
2023 2022 % Change 2023 2022 % Change
----------------------- ------- ------- -------- --------- ------- --------- ------- --------
Operating results
Total revenues 2,594 2,334 11 10,170 9,652 5
Income before
provisions for
credit losses and
income taxes 987 988 - 4,369 4,422 (1)
Net income 768 738 4 3,335 3,383 (1)
Return on common
shareholders'
equity(1) 14.4% 15.3% 16.5 % 18.8%
Earnings per share
Basic $ 2.16 $ 2.10 3 $ 9.47 $ 9.72 (3)
Diluted $ 2.14 $ 2.08 3 $ 9.38 $ 9.61 (2)
----------------------- ------- ------- -------- --------- ------- --------- ------- --------
Operating results -
Adjusted
(2)
Total revenues -
Adjusted(2) 2,759 2,429 14 10,658 9,934 7
Income before
provisions for
credit losses
and income taxes -
Adjusted(2) 1,288 1,083 19 5,018 4,704 7
Net income -
Adjusted(2) 867 738 17 3,409 3,383 1
Return on common
shareholders'
equity - Adjusted(3) 16.3% 15.3% 16.8 % 18.8%
Operating leverage -
Adjusted(3) 4.3% 1.0% (0.5) % 2.1%
Efficiency ratio -
Adjusted(3) 53.3% 55.4% 52.9 % 52.6%
Earnings per share -
Adjusted
(2)
Basic $ 2.46 $ 2.10 17 $ 9.69 $ 9.72 -
Diluted $ 2.44 $ 2.08 17 $ 9.60 $ 9.61 -
----------------------- ------- ------- -------- --------- ------- --------- ------- --------
Common share
information
Dividends declared $ 1.02 $ 0.92 11 $ 3.98 $ 3.58 11
Book value(1) $ 60.68 $ 55.24 $ 60.68 $ 55.24
Share price
High $ 103.58 $ 94.37 $ 103.58 $ 105.44
Low $ 84.97 $ 83.12 $ 84.97 $ 83.12
Close $ 86.22 $ 92.76 $ 86.22 $ 92.76
Number of common shares
(thousands) 338,285 336,582 338,285 336,582
Market capitalization 29,167 31,221 29,167 31,221
----------------------- ------- ------- -------- --------- ------- --------- ------- --------
As at As at
October October
31, 31,
(millions of Canadian dollars) 2023 2022 % Change
Balance sheet and off-balance-sheet
Total assets 423,578 403,740 5
Loans and acceptances, net of allowances 225,443 206,744 9
Deposits 288,173 266,394 8
Equity attributable to common shareholders 20,526 18,594 10
Assets under administration(1) 652,631 616,165 6
Assets under management(1) 120,858 112,346 8
---------------------------------------------------- -------- --------- ------- --------- ----------- --------
Regulatory ratios under Basel III (4)
Capital ratios
Common Equity Tier 1 (CET1) 13.5 % 12.7 %
Tier 1 16.0 % 15.4 %
Total 16.8 % 16.9 %
Leverage ratio 4.4 % 4.5 %
---------------------------------------------------- -------- --------- ------- --------- ----------- --------
TLAC ratio(4) 29.2 % 27.7 %
TLAC leverage ratio(4) 8.0 % 8.1 %
---------------------------------------------------- -------- --------- ------- --------- ----------- --------
Liquidity coverage ratio (LCR)(4) 155 % 140 %
Net stable funding ratio (NSFR)(4) 118 % 117 %
---------------------------------------------------- -------- --------- ------- --------- ----------- --------
Other information
Number of employees - Worldwide (full-time
equivalent) 28,916 27,103 7
Number of branches in Canada 368 378 (3)
Number of banking machines in Canada 944 939 1
---------------------------------------------------- -------- --------- ------- --------- ----------- --------
(1) For additional information on composition of these measures,
see the Glossary section on pages 124 to 127 of the Bank's 2023
Annual Report, which is available on the Bank's website at nbc.ca
or the SEDAR+ website at sedarplus.ca.
(2) See the Financial Reporting Method section on pages 2 to 5
for additional information on non-GAAP financial measures.
(3) For additional information on non-GAAP ratios, see the
Financial Reporting Method section on pages 14 to 19 of the Bank's
2023 Annual Report, which is available on the Bank's website at
nbc.ca or the SEDAR+ website at sedarplus.ca.
(4) For additional information on capital management measures,
see the Financial Reporting Method section on pages 14 to 19 of the
Bank's 2023 Annual Report, which is available on the Bank's website
at nbc.ca or the SEDAR+ website at sedarplus.ca.
Financial Analysis
This press release should be read in conjunction with the 2023
Annual Report (which includes the audited annual consolidated
financial statements and MD&A) available on the Bank's website
at nbc.ca. Additional information about the Bank, including the
Annual Information Form, can be obtained from the Bank's website at
nbc.ca or SEDAR+'s website at sedarplus.ca.
Total Revenues
For the fourth quarter of 2023, the Bank's total revenues
amounted to $2,594 million, up $260 million or 11% from the fourth
quarter of 2022. In the Personal and Commercial segment,
fourth-quarter total revenues rose 8% year over year owing to
growth in loans and deposits, to a higher net interest margin
resulting from interest rate hikes, and to an increase in insurance
revenues, partly offset by a decrease in revenues from foreign
exchange activities. In the Wealth Management segment,
fourth-quarter total revenues grew 4% year over year, essentially
due to higher fee-based revenues, notably from investment
management and trust service fees as well as revenues from mutual
funds. In the Financial Markets segment, fourth-quarter total
revenues on a taxable equivalent basis increased by 31% year over
year due to increases in global markets revenues and in corporate
and investment banking revenues. In the USSF&I segment,
fourth-quarter total revenues were up 17% year over year owing to
higher revenues generated by the Credigy subsidiary as well to
sustained revenue growth at the ABA Bank subsidiary as a result of
business growth. For the Other heading, fourth-quarter total
revenues were down year over year due to lower gains on
investments, partly offset by a higher contribution from Treasury
activities.
For the year ended October 31, 2023, total revenues amounted to
$10,170 million, up $518 million or 5% from $9,652 million in
fiscal 2022. In the Personal and Commercial segment, the fiscal
2023 total revenues rose $482 million or 12% year over year as net
interest income increased owing to loan and deposit growth, a
higher net interest margin arising from interest rate hikes, and
increases in credit card revenues, insurance revenues, and revenues
from bankers' acceptances, partly offset by a decrease in revenues
from foreign exchange activities. In the Wealth Management segment,
the fiscal 2023 total revenues grew 6%, mainly due to an increase
in net interest income, partly offset by a decrease in
transaction-based and other revenues. In the Financial Markets
segment, the fiscal 2023 total revenues on a taxable equivalent
basis were up $188 million or 8% year over year given growth in
corporate and investment banking revenues, partly offset by a
decrease in global markets revenues. In the USSF&I segment, the
fiscal 2023 total revenues were up 9% year over year owing to
revenue growth at ABA Bank as a result of business growth as well
as to an increase in Credigy's revenues. For the Other heading, the
fiscal 2023 total revenues were down year over year due to lower
gains on investments in fiscal 2023, partly offset by a higher
contribution from Treasury activities and a $91 million gain
recorded upon the fair value remeasurement of an equity interest
during fiscal 2023. As for adjusted total revenues, they amounted
to $10,658 million in fiscal 2023, up 7% year over year.
Non-Interest Expenses
For the fourth quarter of 2023, non-interest expenses stood at
$1,607 million, a 19% year-over-year increase that resulted from
higher compensation and employee benefits, notably due to wage
growth and a greater number of employees, as well as from the
variable compensation associated with revenue growth. Occupancy,
including amortization expense, was also up, partly due to the
expanding banking network at ABA Bank as well as to $11 million in
impairment losses on premises and equipment recorded in the fourth
quarter of 2023. An increase in technology expenses, including
amortization, came from the significant investments made to support
the Bank's technological evolution and business development plan as
well as from $75 million in intangible asset impairment losses.
Lastly, other expenses were up due to year-over-year increases in
advertising expenses, travel expenses (as activities with clients
resumed) as well as to $35 million in litigation expenses and $15
million in provisions for contracts. The specified items recorded
in non-interest expenses during the fourth quarter of 2023 had an
unfavourable impact of $136 million. As for adjusted non-interest
expenses, they stood at $1,471 million in the fourth quarter of
2023, up 9% from $1,346 million in fourth-quarter 2022.
For the year ended October 31, 2023, the Bank's non-interest
expenses stood at $5,801 million, up 11% year over year.
Compensation and employee benefits stood at $3,452 million in
fiscal 2023, a 5% year-over-year increase that was mainly due to
wage growth and a greater number of employees. Occupancy expense,
including amortization expense, was also up, partly due to the
expanding banking network at ABA Bank, to expenses related to the
Bank's new head office building, and to $11 million in impairment
losses on premises and equipment. An increase in technology
expenses, including amortization, came from the significant
investments made to support the Bank's technological evolution and
business development plan as well as from the intangible asset
impairment losses recorded in fiscal 2023. The fiscal 2023
communication expenses remained relatively stable year over year,
whereas professional fees were up slightly. Other expenses were
also up due to the same reasons as those provided for the quarter
as well as to the $20 million reversal of the provision for the
compensatory tax on salaries paid in Quebec during fiscal 2022 and
a $25 million expense related to changes to the Excise Tax Act
recorded in 2023. The specified items recorded in non-interest
expenses during fiscal 2023 had an unfavourable impact of $161
million. As for adjusted non-interest expenses, they stood at
$5,640 million in fiscal 2023, up $410 million or 8% from
non-interest expenses of $5,230 million in fiscal 2022.
Provisions for Credit Losses
For the fourth quarter of 2023, the Bank recorded $115 million
in provisions for credit losses compared to $87 million in the
fourth quarter of 2022. An increase in provisions for credit losses
on non-impaired loans of $23 million was due to the growth in the
loan portfolios, the migration of credit risk, the recalibration of
certain risk parameters, and the updates and revisions to the
probability weightings of scenarios, reflecting the uncertainties
in the macroeconomic outlook, uncertainties such as rising
inflationary pressure, high interest rates, and geopolitical
instability. As for fourth-quarter provisions for credit losses on
impaired loans excluding purchased or originated credit-impaired
(POCI)(1) loans, they rose $19 million year over year. This
increase came from Personal Banking (including credit card
receivables) and Commercial Banking, reflecting a normalization of
credit performance, and from Credigy (excluding POCI loans). These
increases were partly offset by a decrease in provisions for credit
losses on impaired loans in the Financial Markets segment.
Provisions for credit losses on POCI loans were down $14 million
year over year due to favourable remeasurements of certain Credigy
portfolios during the fourth quarter of 2023 as well as to
recoveries of credit losses following repayments of POCI loans at
Commercial Banking.
For fiscal 2023, the Bank recorded $397 million in provisions
for credit losses compared to $145 million in fiscal 2022. This
increase was mainly due to higher provisions for credit losses on
non-impaired loans, recorded for the same reasons as those provided
for the quarter. As for provisions for credit losses on impaired
loans excluding POCI(1) loans, they were also up and came from
Personal Banking (including credit card receivables) and Commercial
Banking, reflecting a normalization of credit risk, and from the
Credigy subsidiary. These increases were tempered by a decrease in
provisions for credit losses on impaired loans at ABA Bank.
Provisions for credit losses on POCI loans were down year over year
due to favourable remeasurements of certain Credigy portfolios
during fiscal 2023 as well as to recoveries of credit losses
following repayments of POCI loans at Commercial Banking.
Income Taxes
For the fourth quarter of 2023, income taxes stood at $104
million compared to $163 million in the same quarter of 2022. The
2023 fourth-quarter effective income tax rate was 12% compared to
18% in the same quarter of 2022. The year-over-year change in
effective income tax rate stems mainly from a higher level and
proportion of tax-exempt dividend income and from higher income in
lower tax-rate jurisdictions, factors that were partly offset by
the additional 1.5% tax on banks and life insurers.
For the year ended October 31, 2023, the effective income tax
rate was 16% compared to 21% in fiscal 2022. The year-over-year
change in effective income tax rate stems from the same reasons as
those mentioned for the quarter, partly offset by the impact of the
Canadian government's 2022 tax measures recorded in the first
quarter of 2023, namely, the Canada Recovery Dividend and the
additional 1.5% tax on banks and life insurers.
(1) For additional information on composition of these measures,
see the Glossary section on pages 124 to 127 of the Bank's 2023
Annual Report, which is available on the Bank's website at nbc.ca
or the SEDAR+ website at sedarplus.ca.
Results by Segment
The Bank carries out its activities in four business segments:
Personal and Commercial, Wealth Management, Financial Markets, and
U.S. Specialty Finance and International, which comprises the
activities of the Credigy Ltd. (Credigy) and Advanced Bank of Asia
Limited (ABA Bank) subsidiaries. Other operating activities,
certain specified items, Treasury activities, and the operations of
the Flinks Technology Inc. (Flinks) subsidiary are grouped in the
Other heading of segment results. Each reportable segment is
distinguished by services offered, type of clientele, and marketing
strategy.
Personal and Commercial
Quarter ended October
(millions of Canadian dollars) 31 Year ended October 31
------------------------------- ---------------------------------- ----------------------------------
2023 2022(1) % Change 2023 2022(1) % Change
------------------------------- ------- ------- -------- ------- ------- --------
Operating results
Net interest income 857 785 9 3,321 2,865 16
Non-interest income 295 286 3 1,195 1,169 2
-------------------------------- ------- ------- -------- ------- ------- --------
Total revenues 1,152 1,071 8 4,516 4,034 12
Non-interest expenses 690 574 20 2,510 2,241 12
-------------------------------- ------- ------- -------- ------- ------- --------
Income before provisions for
credit losses and income taxes 462 497 (7) 2,006 1,793 12
Provisions for credit losses 65 42 55 238 97
-------------------------------- ------- ------- -------- ------- ------- --------
Income before income taxes 397 455 (13) 1,768 1,696 4
Income taxes 109 120 (9) 486 449 8
-------------------------------- ------- ------- -------- ------- ------- --------
Net income 288 335 (14) 1,282 1,247 3
-------------------------------- ------- ------- -------- ------- ------- --------
Less: Specified items after
income
taxes(2) (49) - (49) -
-------------------------------- ------- ------- -------- ------- ------- --------
Net income - Adjusted (2) 337 335 1 1,331 1,247 7
-------------------------------- ------- ------- -------- ------- ------- --------
Net interest margin(3) 2.36 % 2.26% 2.35 % 2.15%
Average interest-bearing
assets(3) 144,321 138,064 5 141,458 133,543 6
Average assets(4) 151,625 145,145 4 148,511 140,300 6
Average loans and acceptances(4) 150,847 144,297 5 147,716 139,538 6
Net impaired loans(3) 285 193 48 285 193 48
Net impaired loans as a % of
total loans and acceptances(3) 0.2 % 0.1% 0.2 % 0.1%
Average deposits(4) 87,873 85,902 2 85,955 81,996 5
Efficiency ratio(3) 59.9 % 53.6% 55.6 % 55.6%
Efficiency ratio - Adjusted(5) 54.0 % 53.6% 54.1 % 55.6%
-------------------------------- ------- ------- -------- ------- ------- --------
(1) For the quarter and year ended October 31, 2022, certain
amounts were reclassified, notably due to a revised method for the
sectoral allocation of technology investment expenses.
(2) See the Fi nancial Reporting Method section on pages 2 to 5
for additional information on non-GAAP financial measures. During
the fourth quarter and year ended October 31, 2023, the segment
recorded, in the Non-interest expenses item, $59 million in
intangible asset impairment losses ($42 million net of income
taxes) on technology development as well as charges of $9 million
($7 million net of income taxes) for contract termination
penalties.
(3) For additional information on the composition of these
measures, see the Glossary section on pages 124 to 127 of the
Bank's 2023 Annual Report, which is available on the Bank's website
at nbc.ca or the SEDAR+ website at sedarplus.ca.
(4) Represents an average of the daily balances for the period.
(5) For additional information on non-GAAP ratios, see the
Financial Reporting Method section on pages 14 to 19 of the Bank's
2023 Annual Report, which is available on the Bank's website at
nbc.ca or the SEDAR+ website at sedarplus.ca.
In the Personal and Commercial segment, net income totalled $288
million in the fourth quarter of 2023 compared to $335 million in
the fourth quarter of 2022, a 14% year-over-year decrease that was
due to higher non-interest expenses (including the specified items
recorded in the fourth quarter of 2023) and higher provisions for
credit losses. As for the segment's adjusted net income in the
fourth quarter of 2023, it totalled $337 million, up 1% year over
year. Fourth-quarter income before provisions for credit losses and
income taxes amounted to $462 million, down 7% year over year,
whereas adjusted income before provisions for credit losses and
income taxes rose 7%. Fourth-quarter net interest income rose 9%
year over year owing to growth in personal and commercial loans and
deposits as well as to a higher net interest margin, which was
2.36% in fourth-quarter 2023 compared to 2.26% in fourth-quarter
2022. This growth reflects the interest rate hikes and was mainly
attributable to the deposit margin. As for fourth-quarter
non-interest income, it grew $9 million or 3% year over year.
Personal Banking's fourth-quarter total revenues increased by
$51 million year over year. This increase came from an increase in
net interest income driven by loan and deposit growth, from an
improved margin on deposits, and from higher insurance revenues
(reflecting revisions to actuarial reserves). Commercial Banking's
fourth-quarter total revenues grew $30 million year over year,
mainly due to an increase in net interest income that was driven by
loan and deposit growth and an improved deposit margin, partly
offset by a decrease in revenues from foreign exchange
activities.
For the fourth quarter of 2023, Personal and Commercial's
non-interest expenses stood at $690 million, a 20% year-over-year
increase that was mainly due to $68 million in specified items
recorded during the quarter. The increase also came from higher
compensation and employee benefits (resulting from wage growth),
from greater investments made as part of the segment's
technological evolution, and from an increase in operations support
charges. At 59.9%, the efficiency ratio deteriorated, mainly due to
the specified items recorded during the fourth quarter of 2023. As
for the segment's adjusted non-interest expenses, they stood at
$622 million in the fourth quarter of 2023, up 8% year over year.
Its adjusted efficiency ratio was 54.0% compared to 53.6% in the
fourth quarter of 2022. The segment recorded $65 million in
provisions for credit losses in the fourth quarter of 2023 compared
to $42 million in the same quarter of 2022. This increase was
mainly due to higher provisions for credit losses on impaired
Personal Banking loans (including credit card receivables) and
impaired Commercial Banking loans, reflecting a normalization of
credit performance. Fourth-quarter provisions for credit losses on
non-impaired Commercial Banking loans were also up year over year.
Also during the fourth quarter of 2023, the segment recorded
recoveries of credit losses on Commercial Banking's POCI loans as a
result of loan repayments.
For fiscal 2023, the Personal and Commercial segment's net
income totalled $1,282 million compared to $1,247 million in fiscal
2022, a 3% year-over-year increase that was driven by growth of
$482 million in the segment's total revenues, partly offset by
higher non-interest expenses (including the fiscal 2023 specified
items) and by notably higher provisions for credit losses. As for
the segment's adjusted net income in fiscal 2023, it totalled
$1,331 million, up 7% year over year. For fiscal 2023, the
segment's income before provisions for credit losses and income
taxes amounted to $2,006 million, up 12% year over year, while its
adjusted income before provisions for credit losses and income
taxes rose 16%. Personal Banking's fiscal 2023 total revenues were
up 8% year over year, mainly due to growth in loans and deposits
and to a higher deposit margin (partly offset by a lower margin on
loans) as well as to increases in card revenues and insurance
revenues. In addition, Commercial Banking's 2023 total revenues
rose 18% owing to growth in loans and deposits, to a higher net
interest margin, as well as to increases in revenues from bankers'
acceptances, partly offset by a decrease in revenues from foreign
exchange activities.
For fiscal 2023, the segment's non-interest expenses stood at
$2,510 million, a 12% year-over-year increase that was due to the
same reasons provided above for the quarter. At 55.6%, the
segment's fiscal 2023 efficiency ratio remained stable compared to
last year. As for the segment's adjusted non--interest expenses for
fiscal 2023, they stood at $2,442 million, up 9% year over year. At
54.1%, the segment's 2023 adjusted efficiency ratio improved by 1.5
percentage points from 55.6% in 2022. The segment recorded $238
million in provisions for credit losses in fiscal 2023, which is
$141 million more than the $97 million recorded in fiscal 2022.
This increase was due to higher provisions for credit losses on
impaired Personal Banking loans (including credit card receivables)
and impaired Commercial Banking loans, reflecting a normalization
of credit performance. As for the segment's provisions for credit
losses on non-impaired loans, they were up due to growth in the
loan portfolios, to the migration of credit risk, and to a less
favourable macroeconomic outlook during fiscal 2023. Also during
fiscal 2023, the segment recorded recoveries of credit losses on
Commercial Banking's POCI loans as a result of loan repayments
.
Wealth Management
Quarter ended October
(millions of Canadian dollars) 31 Year ended October 31
------------------------------- ---------------------------------- ----------------------------------
2023 2022(1) % Change 2023 2022(1) % Change
------------------------------- ------- ------- -------- ------- ------- --------
Operating results
Net interest income 188 187 1 778 594 31
Fee-based revenues 371 347 7 1,432 1,429 -
Transaction-based and other
revenues 79 79 - 311 352 (12)
-------------------------------- ------- ------- -------- ------- ------- --------
Total revenues 638 613 4 2,521 2,375 6
Non-interest expenses 423 349 21 1,534 1,417 8
-------------------------------- ------- ------- -------- ------- ------- --------
Income before provisions for
credit losses and income taxes 215 264 (19) 987 958 3
Provisions for credit losses 1 2 (50) 2 3 (33)
-------------------------------- ------- ------- -------- ------- ------- --------
Income before income taxes 214 262 (18) 985 955 3
Income taxes 59 69 (14) 271 254 7
-------------------------------- ------- ------- -------- ------- ------- --------
Net income 155 193 (20) 714 701 2
-------------------------------- ------- ------- -------- ------- ------- --------
Less: Specified items after
income
taxes(2) (32) - (32) -
-------------------------------- ------- ------- -------- ------- ------- --------
Net income - Adjusted (2) 187 193 (3) 746 701 6
-------------------------------- ------- ------- -------- ------- ------- --------
Average assets(3) 8,494 8,582 (1) 8,560 8,440 1
Average loans and acceptances(3) 7,523 7,513 - 7,582 7,343 3
Net impaired loans(4) 8 15 (47) 8 15 (47)
Average deposits(3) 40,280 37,609 7 40,216 35,334 14
Assets under administration(4) 652,631 616,165 6 652,631 616,165 6
Assets under management(4) 120,858 112,346 8 120,858 112,346 8
Efficiency ratio(4) 66.3 % 56.9% 60.8 % 59.7%
Efficiency ratio - Adjusted(5) 59.6 % 56.9% 59.1 % 59.7%
-------------------------------- ------- ------- -------- ------- ------- --------
(1) For the quarter and year ended October 31, 2022, certain
amounts were reclassified, notably due to a revised method for the
sectoral allocation of technology investment expenses.
(2) See the Financial Reporting Method section on pages 2 to 5
for additional information on non-GAAP financial measures. For the
fourth quarter and year ended October 31, 2023, the segment
recorded, in the Non-interest expenses item, $8 million in
intangible asset impairment losses ($6 million net of income taxes)
on technology development as well as $35 million in litigation
expenses ($26 million net of income taxes) to resolve litigations
and other disputes on various ongoing or potential claims against
the Bank.
(3) Represents an average of the daily balances for the period.
(4) For additional information on composition of these measures,
see the Glossary section on pages 124 to 127 of the Bank's 2023
Annual Report, which is available on the Bank's website at nbc.ca
or the SEDAR+ website at sedarplus.ca.
(5) For additional information on non-GAAP ratios, see the
Financial Reporting Method section on pages 14 to 19 of the Bank's
2023 Annual Report, which is available on the Bank's website at
nbc.ca or the SEDAR+ website at sedarplus.ca.
In the Wealth Management segment, net income totalled $155
million in the fourth quarter of 2023, a 20% decrease from $193
million in the fourth quarter of 2022, as growth in the segment's
total revenues was more than offset by higher non-interest expenses
(including the specified items recorded during the fourth quarter
of 2023). As for the segment's adjusted net income, it totalled
$187 million in the fourth quarter of 2023, down 3% year over year.
The segment's fourth-quarter total revenues amounted to $638
million, up $25 million or 4% from $613 million in the fourth
quarter of 2022. The fourth-quarter net interest income remained
relatively stable year over year, with the impact of higher
interest rates being offset by changes in deposit mix.
Fourth-quarter fee-based revenues increased by 7%, mostly due to
stronger year-over-year stock market performance. As for
fourth-quarter transaction-based and other revenues, they remained
stable year over year.
For the fourth quarter of 2023, the Wealth Management segment's
non-interest expenses stood at $423 million compared to $349
million in the same quarter of 2022, a 21% year-over-year increase
that was due to higher compensation and employee benefits, notably
the variable compensation associated with revenue growth, to higher
technology expenses incurred for the segment's initiatives, to
higher external management fees, and to $43 million in specified
items recorded during the quarter. At 66.3%, the fourth-quarter
efficiency ratio deteriorated year over year, partly due to the
specified items recorded during the quarter. As for the segment's
adjusted non-interest expenses, they stood at $380 million in the
fourth quarter of 2023, up 9% year over year. And the adjusted
efficiency ratio was 59.6% in fourth-quarter 2023 versus 56.9% in
fourth-quarter 2022. The segment recorded $1 million in provisions
for credit losses in the fourth quarter of 2023 compared to $2
million in the fourth quarter of 2022.
For fiscal 2023, Wealth Management's net income totalled $714
million compared to $701 million in fiscal 2022, a 2%
year-over-year increase that was driven by growth in the segment's
total revenues, partly offset by higher non-interest expenses
(including the fiscal 2023 specified items). As for the segment's
adjusted net income in fiscal 2023, it totalled $746 million, up 6%
from $701 million in fiscal 2022. The segment's total revenues
amounted to $2,521 million in fiscal 2023, up 6% from $2,375
million in fiscal 2022. Its net interest income was also up, rising
$184 million or 31% as a result of the interest rate hikes that
occurred during fiscal years 2023 and 2022. The fiscal 2023
fee-based revenues remained relatively stable compared to fiscal
2022. As for transaction-based and other revenues, they were down
12% year over year given lower commissions on transactions during
fiscal 2023. The segment's non-interest expenses stood at $1,534
million in fiscal 2023 versus $1,417 million in fiscal 2022, for an
increase of 8% that was due to higher compensation and employee
benefits, to higher technology expenses related to the segment's
initiatives, and to $43 million in specified items recorded in
fiscal 2023. At 60.8% in fiscal 2023, the segment's efficiency
ratio deteriorated, partly due to the fiscal 2023 specified items.
As for the segment's adjusted non-interest expenses, they stood at
$1,491 million, up 5% from $1,417 million in fiscal 2022. At 59.1%,
the segment's 2023 adjusted efficiency ratio improved by 0.6
percentage points from 59.7% in fiscal 2022. Wealth Management
recorded $2 million in provisions for credit losses in fiscal 2023
compared to $3 million in fiscal 2022 .
Financial Markets
(taxable equivalent
basis)(1)
(millions of Canadian Quarter ended October
dollars) 31 Year ended October 31
------------------------ ------------------------------------ -------------------------------------
2023 2022(2) % Change 2023 2022(2) % Change
------------------------ ------- --- ------- --- -------- ------- --- ------- --- ---------
Operating results
Global markets
Equities 319 207 54 904 979 (8)
Fixed-income 84 71 18 417 367 14
Commodities and foreign
exchange 32 26 23 173 156 11
------------------------ ------- --- ------- --- -------- ------- --- ------- --- ---------
435 304 43 1,494 1,502 (1)
Corporate and investment
banking 300 259 16 1,162 966 20
------------------------ ------- --- ------- --- -------- ------- --- ------- --- ---------
Total revenues(1) 735 563 31 2,656 2,468 8
Non-interest expenses 319 254 26 1,161 1,029 13
------------------------ ------- --- ------- --- -------- ------- --- ------- --- ---------
Income before provisions
for
credit losses and
income taxes 416 309 35 1,495 1,439 4
Provisions for credit
losses 24 32 (25) 39 (23)
------------------------ ------- --- ------- --- -------- ------- --- ------- --- ---------
Income before income
taxes 392 277 42 1,456 1,462 -
Income taxes(1) 108 74 46 401 388 3
------------------------ ------- --- ------- --- -------- ------- --- ------- --- ---------
Net income 284 203 40 1,055 1,074 (2)
------------------------ ------- --- ------- --- -------- ------- --- ------- --- ---------
Less: Specified items
after income
taxes(3) (5) - (5) -
------------------------ ------- --- ------- --- -------- ------- --- ------- --- ---------
Net income - Adjusted
(3) 289 203 42 1,060 1,074 (1)
------------------------ ------- --- ------- --- -------- ------- --- ------- --- ---------
Average assets(4) 193,484 160,778 20 180,837 154,349 17
Average loans and
acceptances(4)
(Corporate Banking
only) 30,254 24,576 23 29,027 22,311 30
Net impaired loans(5) 30 91 (67) 30 91 (67)
Net impaired loans as a
% of
total loans and
acceptances(5) 0.1 % 0.4% 0.1 % 0.4%
Average deposits(4) 59,406 49,487 20 57,459 47,242 22
Efficiency ratio (5) 43.4 % 45.1% 43.7 % 41.7%
Efficiency ratio -
Adjusted(6) 42.4 % 45.1 % 43.4 % 41.7 %
------------------------ ------- --- ------- --- -------- ------- --- ------- --- ---------
(1) The Total revenues and Income taxes items of the Financial
Markets segment are presented on a taxable equivalent basis.
Taxable equivalent basis is a calculation method that consists of
grossing up certain revenues taxed at lower rates by the income tax
to a level that would make it comparable to revenues from taxable
sources in Canada. For the quarter ended October 31, 2023, Total
revenues were grossed up by $162 million ($94 million in 2022) and
an equivalent amount was recognized in Income taxes. For the year
ended October 31, 2023, Total revenues were grossed up by $571
million ($277 million in 2022) and an equivalent amount was
recognized in Income taxes. The effect of these adjustments is
reversed under the Other heading of segment results.
(2) For the quarter and year ended October 31, 2022, certain
amounts were reclassified, notably due to a revised method for the
sectoral allocation of technology investment expenses.
(3) See the Financial Reporting Method section on pages 2 to 5
for additional information on non-GAAP financial measures. During
the fourth-quarter and year ended October 31, 2023, the segment
recorded, in the Non-interest expenses item, $7 million in
intangible asset impairment losses ($5 million net of income taxes)
on technology development.
(4) Represents an average of the daily balances for the period.
(5) For additional information on composition of these measures,
see the Glossary section on pages 124 to 127 of the Bank's 2023
Annual Report, which is available on the Bank's website at nbc.ca
or the SEDAR+ website at sedarplus.ca.
(6) For additional information on non-GAAP ratios, see the
Financial Reporting Method section on pages 14 to 19 of the Bank's
2023 Annual Report, which is available on the Bank's website at
nbc.ca or the SEDAR+ website at sedarplus.ca .
In the Financial Markets segment, net income totalled $284
million in the fourth quarter of 2023, up 40% from $203 million in
the fourth quarter of 2022. As for adjusted net income, which
excludes intangible asset impairment losses, it totalled $289
million, up 42% from $203 million in the fourth quarter of 2022.
The segment's fourth-quarter total revenues on a taxable equivalent
basis amounted to $735 million, up $172 million or 31% from $563
million in the fourth quarter of 2022. Global markets revenues rose
43% year over year owing to increases across every revenue
category, notably revenues from equities, which posted growth of
54%. Fourth-quarter corporate and investment banking revenues grew
16% year over year given increases in banking service revenues and
revenues from capital markets activity, partly offset by a decrease
in revenues from merger and acquisition activity.
For the fourth quarter of 2023, the segment's non-interest
expenses stood at $319 million, a 26% year-over-year increase that
was due to higher compensation and employee benefits (notably wage
growth and the variable compensation associated with revenue
growth), to higher technology investment expenses, and to expenses
related to the segment's business growth. At 43.4% in
fourth-quarter 2023 versus 45.1% in fourth-quarter 2022, the
efficiency ratio improved by 1.7 percentage points owing to growth
in the segment's revenues. As for adjusted non-interest expenses,
they stood at $312 million in fourth-quarter 2023 versus $254
million in fourth-quarter 2022. And the adjusted efficiency ratio
was 42.4% in fourth-quarter 2023 versus 45.1% in fourth-quarter
2022. The segment recorded $24 million in provisions for credit
losses in the fourth quarter of 2023 compared to $32 million in the
same quarter last year, for a decrease that stems from lower
provisions for credit losses on impaired loans in the fourth
quarter of 2023. As for provisions for credit losses on
non-impaired loans, they were up slightly year over year.
For fiscal 2023, Financial Markets' net income totalled $1,055
million, down 2% year over year. Growth in the segment's total
revenues was more than offset by higher non-interest expenses and
higher provisions for credit losses. As for adjusted net income,
which excludes intangible asset impairment losses, it totalled
$1,060 million, down 1% from $1,074 million in fiscal 2022. The
segment's income before provisions for credit losses and income
taxes stood at $1,495 million in fiscal 2023, up $56 million or 4%
from fiscal 2022. Its fiscal 2023 total revenues on a taxable
equivalent basis amounted to $2,656 million, a $188 million or 8%
increase from $2,468 million in fiscal 2022. Global markets
revenues were down 1% due to an 8% decrease in revenues from equity
securities, whereas revenues from fixed-income securities rose 14%
and revenues from commodities and foreign exchange activities rose
11%. As for the fiscal 2023 corporate and investment banking
revenues, they grew 20% year over year given growth in banking
service revenues, higher revenues from capital markets activity,
and higher revenues from merger and acquisition activity.
For fiscal 2023, the segment's non-interest expenses rose 13%
year over year. This increase was due to the same reasons provided
above for the fourth quarter. At 43.7%, the fiscal 2023 efficiency
ratio deteriorated when compared to 41.7% in fiscal 2022. As for
the segment's adjusted non-interest expenses, they stood at $1,154
million in fiscal 2023 versus $1,029 million in fiscal 2022. And as
for the adjusted efficiency ratio, it was 43.4% in fiscal 2023
versus 41.7% in fiscal 2022. The segment recorded $39 million in
provisions for credit losses during fiscal 2023 compared to $23
million in recoveries of credit losses in fiscal 2022. This
increase was mainly due to a $60 million increase in provisions for
credit losses on non-impaired loans, as there was loan portfolio
growth in fiscal 2023 and the fiscal 2023 macroeconomic conditions
were less favourable than those of fiscal 2022. In addition, the
fiscal 2023 provisions for credit losses on impaired loans were up
slightly year over year.
U.S. Specialty Finance and International (USSF&I)
(millions of Canadian Quarter ended October
dollars) 31 Year ended October 31
----------------------- ------------------------------------------ --------------------------------
2023 2022 % Change 2023 2022 % Change
----------------------- ------ ------ ------------------ ------ ------ --------
Total revenues
Credigy 126 88 43 483 439 10
ABA Bank 187 179 4 726 669 9
International - - - 2
----------------------- ------ ------ ------------------ ------ ------ --------
313 267 17 1,209 1,110 9
---------------------- ------ ------ ------------------ ------ ------ --------
Non-interest expenses
Credigy 38 32 19 140 131 7
ABA Bank 68 58 17 260 212 23
International - - 2 1
----------------------- ------ ------ ------------------ ------ ------ --------
106 90 18 402 344 17
----------------------- ------ ------ ------------------ ------ ------ --------
Income before
provisions for
credit losses and
income taxes 207 177 17 807 766 5
----------------------- ------ ------ ------------------ ------ ------ --------
Provisions for credit
losses
Credigy 10 (2) 81 35
ABA Bank 13 12 8 32 31 3
----------------------- ------ ------ ------------------ ------ ------ --------
23 10 113 66 71
---------------------- ------ ------ ------------------ ------ ------ --------
Income before income
taxes 184 167 10 694 700 (1)
----------------------- ------ ------ ------------------ ------ ------ --------
Income taxes
Credigy 17 12 42 55 57 (4)
ABA Bank 22 23 (4) 91 86 6
------ ------ --------
39 35 11 146 143 2
---------------------- ------ ------ ------------------ ------ ------ --------
Net income
Credigy 61 46 33 207 216 (4)
ABA Bank 84 86 (2) 343 340 1
International - - (2) 1
----------------------- ------ ------ ------------------ ------ ------ --------
145 132 10 548 557 (2)
---------------------- ------ ------ ------------------ ------ ------ --------
Average assets(1) 24,258 20,395 19 23,007 18,890 22
Average loans and
receivables(1) 19,729 16,642 19 18,789 15,283 23
Purchased or originated
credit-impaired
(POCI) loans 511 459 11 511 459 11
Net impaired loans
excluding
POCI loans(2) 283 180 57 283 180 57
Average deposits(1) 11,399 9,343 22 10,692 8,577 25
Efficiency ratio(2) 33.9 % 33.7% 33.3 % 31.0%
----------------------- ------ ------ ------------------ ------ ------ --------
(1) Represents an average of the daily balances for the period.
(2) For additional information on composition of these measures,
see the Glossary section on pages 124 to 127 of the Bank's 2023
Annual Report, which is available on the Bank's website at nbc.ca
or the SEDAR+ website at sedarplus.ca.
In the USSF&I segment, net income totalled $145 million in
the fourth quarter of 2023 compared to $132 million in the fourth
quarter of 2022, a 10% increase that was essentially driven by the
Credigy subsidiary, notably its total revenue growth. For fiscal
2023, the segment's net income totalled $548 million compared to
$557 million in fiscal 2022, as growth in total revenues was more
than offset by higher non-interest expenses and higher provisions
for credit losses.
Credigy
The Credigy subsidiary's net income totalled $61 million in the
fourth quarter of 2023, up $15 million or 33% year over year. Its
fourth-quarter total revenues amounted to $126 million compared to
$88 million in the same quarter of 2022, an increase that was
mainly due to loan volume growth as well as to growth in
non-interest income given a higher unfavourable impact of
remeasuring certain portfolios at fair value during the fourth
quarter of 2022. Its fourth-quarter non-interest expenses stood at
$38 million, a $6 million year-over-year increase that was mainly
due to higher compensation and employee benefits, notably the
variable compensation associated with revenue growth in the fourth
quarter of 2023. Credigy's provisions for credit losses increased
by $12 million compared to the same quarter of 2022, due to an
increase in provisions for credit losses on non-impaired loans
associated with growth in the loan portfolio and a deterioration in
certain risk parameters as well as to impaired loans, with these
increases being partly offset by a decrease in provisions for
credit losses on POCI loans resulting from favourable
remeasurements of certain portfolios during the fourth quarter of
2023.
For fiscal 2023, Credigy's net income totalled $207 million, a
4% year-over-year decrease that was due to notably higher
provisions for credit losses. The subsidiary's income before
provisions for credit losses and income taxes totalled $343 million
in fiscal 2023, up 11% year over year. Its total revenues amounted
to $483 million in fiscal 2023, up from $439 million in fiscal
2022. A decrease in net interest income was more than offset by
growth in non-interest income, as there was a higher unfavourable
impact from fair value remeasurements of certain portfolios during
fiscal 2022. For fiscal 2023, Credigy's non-interest expenses rose
$9 million year over year, mainly due to compensation and employee
benefits. Its fiscal 2023 provisions for credit losses rose $46
million year over year, mainly due to the same reasons provided
above for the fourth quarter.
ABA Bank
For the fourth quarter of 2023, the ABA Bank subsidiary's net
income totalled $84 million, down $2 million or 2% from the same
quarter in 2022. The subsidiary's fourth-quarter total revenues
rose 4%, mainly due to sustained loan growth, partly offset by an
increase in interest expenses on deposits. Its fourth-quarter
non-interest expenses stood at $68 million, a $10 million or 17%
year-over-year increase attributable to higher compensation and
employee benefits (notably due to wage growth given a greater
number of employees) and to higher occupancy expenses resulting
from the subsidiary's business growth and opening of new branches.
Its provisions for credit losses, which stood at $13 million in the
fourth quarter of 2023, rose $1 million year over year.
For fiscal 2023, ABA Bank's net income totalled $343 million, up
$3 million or 1% from fiscal 2022. Growth in the subsidiary's
business activities, mainly sustained loan growth, drove total
revenues up 9% year over year. This increase was, however, partly
offset by higher interest rates on deposits and lower interest
rates on loans given a competitive environment in Cambodia. The
subsidiary's fiscal 2023 non-interest expenses stood at $260
million, a 23% year-over-year increase that was due to the same
reasons provided above for the fourth quarter as well as to higher
advertising expenses. Its provisions for credit losses stood at $32
million in fiscal 2023, a $1 million year-over-year increase that
stems from higher provisions for credit losses on non-impaired
loans, partly offset by lower provisions for credit losses on
impaired loans.
Other
Quarter ended Year ended October
(millions of Canadian dollars) October 31 31
------------------------------------------------------ ---------------- --------------------
2023 2022(1) 2023 2022(1)
------------------------------------------------------ ------- ------- --------- ---------
Operating results
Net interest income(2) (161) (155) (591) (536)
Non-interest income(2) (83) (25) (141) 201
------------------------------------------------------- ------- ------- --------- ---------
Total revenues (244) (180) (732) (335)
Non-interest expenses 69 79 194 199
------------------------------------------------------- ------- ------- --------- ---------
Income before provisions for credit losses
and income taxes (313) (259) (926) (534)
Provisions for credit losses 2 1 5 2
------------------------------------------------------- ------- ------- --------- ---------
Income before income taxes (315) (260) (931) (536)
Income taxes (recovery)(2) (211) (135) (667) (340)
------------------------------------------------------- ------- ------- --------- ---------
Net loss (104) (125) (264) (196)
Non-controlling interests - - (2) (1)
------------------------------------------------------- ------- ------- --------- ---------
Net income (loss) attributable to the Bank's
shareholders and holders of other equity instruments (104) (125) (262) (195)
------------------------------------------------------- ------- ------- --------- ---------
Less: Specified items after income taxes(3) (13) - 12 -
------------------------------------------------------- ------- ------- --------- ---------
Net loss - Adjusted (3) (91) (125) (276) (196)
------------------------------------------------------- ------- ------- --------- ---------
Average assets(4) 64,134 74,921 69,731 71,868
------------------------------------------------------- ------- ------- --------- ---------
(1) For the quarter and year ended October 31, 2022, certain
amounts were reclassified, notably due to a revised method for the
sectoral allocation of technology investment expenses.
(2) For the quarter ended October 31, 2023, Net interest income
was reduced by $90 million ($65 million in 2022), Non-interest
income was reduced by $75 million ($30 million in 2022), and an
equivalent amount was recorded in Income taxes (recovery). For the
year ended October 31, 2023, Net interest income was reduced by
$332 million ($234 million in 2022), Non-interest income was
reduced by $247 million ($48 million in 2022), and an equivalent
amount was recorded in Income taxes (recovery). These adjustments
include a reversal of the taxable equivalent of the Financial
Markets segment and the Other heading. Taxable equivalent basis is
a calculation method that consists 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.
(3) See the Financial Reporting Method section on pages 2 to 5
for additional information on non-GAAP financial measures. During
the quarter and year ended October 31, 2023, the Bank recorded $12
million in impairment losses ($9 million net of income taxes) on
premises and equipment and intangible assets and $6 million in
charges ($4 million net of income taxes) for penalties on onerous
contracts. During the year ended October 31, 2023, the bank
recorded a $91 million gain ($67 million net of income taxes) upon
the fair value measurement of an equity interest, a $25 million
expense ($18 million net of income taxes) related to the
retroactive impact of changes to the Excise Tax Act and a $24
million income tax expense related to the Canadian government's
2022 tax measures.
(4) Represents an average of the daily balances for the period .
For the Other heading of segment results, there was a net loss
of $104 million in the fourth quarter of 2023 compared to a net
loss of $125 million in the fourth quarter of 2022. The change was
notably due to lower gains on investments in fiscal 2023, partly
offset by a higher contribution from Treasury activities. For the
fourth quarter of 2023, non-interest expenses were down year over
year, mainly due to a decrease in variable compensation, partly
offset by certain specified items recorded in the fourth quarter of
2023, notably $12 million in impairment losses on premises and
equipment and intangible assets and $6 million in charges related
to penalties on onerous contracts. The specified items recorded
during the fourth quarter of 2023 had an unfavourable impact of $13
million on net loss. As for fourth-quarter adjusted net loss, it
was $91 million compared to a net loss of $125 million in the same
quarter of 2022.
For the year ended October 31, 2023, net loss stood at $264
million compared to a net loss of $196 million in fiscal 2022. The
change in net loss was notably due to lower gains on investments in
fiscal 2023, partly offset by a higher contribution from Treasury
activities and a $91 million gain recorded upon the fair value
remeasurement of an equity interest during fiscal 2023. For fiscal
2023, non-interest expenses were down slightly year over year,
mainly due to variable compensation, partly offset by certain
specified items recorded in fiscal 2023, notably a $25 million
expense related to the retroactive impact of changes to the Excise
Tax Act, $12 million in impairment losses on premises and equipment
and intangible assets, and $6 million in charges related to
penalties on onerous contracts. The fiscal 2023 specified items had
a $12 million favourable impact on net loss. As for adjusted net
loss, it stood at $276 million in fiscal 2023 compared to a $196
million net loss in fiscal 2022.
Consolidated Balance Sheet
Consolidated Balance Sheet Summary
As at October As at October
(millions of Canadian dollars) 31, 2023 31, 2022 % Change
------------------------------------------------ ------------- ------------- --------
Assets
Cash and deposits with financial institutions 35,234 31,870 11
Securities 121,818 109,719 11
Securities purchased under reverse repurchase
agreements and securities borrowed 11,260 26,486 (57)
Loans and acceptances, net of allowances 225,443 206,744 9
Other 29,823 28,921 3
------------------------------------------------ ------------- ------------- --------
423,578 403,740 5
----------------------------------------------- ------------- ------------- --------
Liabilities and equity
Deposits 288,173 266,394 8
Other 110,979 114,101 (3)
Subordinated debt 748 1,499 (50)
Equity attributable to the Bank's shareholders
and holders of other equity instruments 23,676 21,744 9
Non-controlling interests 2 2 -
------------------------------------------------ ------------- ------------- --------
423,578 403,740 5
----------------------------------------------- ------------- ------------- --------
Assets
As at October 31, 2023, the Bank had total assets of $423.6
billion, a $19.9 billion or 5% increase from $403.7 billion as at
October 31, 2022. At $35.2 billion as at October 31, 2023, cash and
deposits with financial institutions were up $3.3 billion since
October 31, 2022, mainly due to an increase in deposits with the
U.S. Federal Reserve, partly offset by a decrease in deposits with
the Bank of Canada. The high level of cash and deposits with
financial institutions is explained in part by the excess liquidity
related to the accommodative monetary policies that have been
applied by central banks since 2020.
Securities rose $12.1 billion since October 31, 2022, due to a
$12.6 billion or 14% increase in securities at fair value through
profit or loss, an increase that was essentially attributable to
equity securities and securities issued or guaranteed by the
Canadian government, partly offset by a decrease in securities
issued or guaranteed by U.S. Treasury, other U.S. agencies, and
other foreign governments. As for securities other than those
measured at fair value through profit or loss, they decreased by
$0.5 billion. Securities purchased under reverse repurchase
agreements and securities borrowed decreased by $15.2 billion since
October 31, 2022, mainly due to the activities of the Financial
Markets segment and Treasury.
Totalling $225.4 billion as at October 31, 2023, loans and
acceptances, net of allowances for credit losses, rose $18.7
billion or 9% since October 31, 2022.
The following table provides a breakdown of the main loan and
acceptance portfolios.
As at October As at October
(millions of Canadian dollars) 31, 2023 31, 2022
------------------------------------------------------ ------------- -------------
Loans and acceptances
Residential mortgage and home equity lines of credit 116,444 109,648
Personal 16,761 15,804
Credit card 2,603 2,389
Business and government 90,819 79,858
------------------------------------------------------ ------------- -------------
226,627 207,699
Allowances for credit losses (1,184) (955)
------------------------------------------------------ ------------- -------------
225,443 206,744
----------------------------------------------------- ------------- -------------
Since October 31, 2022, residential mortgages (including home
equity lines of credit) rose $6.8 billion or 6% due to sustained
demand for mortgage credit in the Personal and Commercial segment,
as well as to the activities of the Financial Markets segment and
the ABA Bank and Credigy subsidiaries. Personal loans totalled
$16.8 billion at year-end 2023, rising $1.0 billion from $15.8
billion since October 31, 2022. This increase came mainly from
business growth at Personal Banking and ABA Bank. At $2.6 billion,
credit card receivables rose $0.2 billion since October 31, 2022.
Loans and acceptances to business and government rose $10.9 billion
or 14% compared to October 31, 2022, mainly due to business growth
at Commercial Banking, in corporate banking financial services, and
at ABA Bank.
Impaired loans include all loans classified in Stage 3 of the
expected credit loss model and POCI loans. As at October 31, 2023,
gross impaired loans stood at $1,584 million compared to $1,271
million as at October 31, 2022. As for net impaired loans, they
totalled $1,276 million as at October 31, 2023 compared to $1,030
million as at October 31, 2022. Net impaired loans excluding POCI
loans amounted to $606 million, rising $127 million from $479
million as at October 31, 2022. This increase was essentially due
to an increase in the net impaired loans of the loan portfolios of
the Personal and Commercial segment and of the Credigy (excluding
POCI loans) and ABA Bank subsidiaries, partly offset by a decrease
in the net impaired loans of the loan portfolios of the Wealth
Management and Financial Markets segments. Net POCI loans stood at
$670 million as at October 31, 2023 compared to $551 million as at
October 31, 2022, an increase due to portfolio acquisitions
conducted by Credigy and Commercial Banking during fiscal 2023.
As at October 31, 2023, other assets totalled $29.8 billion
compared to $28.9 billion as at October 31, 2022, a $0.9 billion
increase that was mainly due to a $1.9 billion increase in other
assets, notably receivables, prepaid expenses and other items;
interest and dividends receivable; and current tax assets, with
these increases being partly offset by a decrease in amounts due
from clients, dealers and brokers. Furthermore, derivative
financial instruments were down $1.0 billion, with this result
being related to the activities of the Financial Markets
segment.
Liabilities
As at October 31, 2023, the Bank had total liabilities of $399.9
billion compared to $382.0 billion as at October 31, 2022.
The Bank's total deposit liability stood at $288.2 billion as at
October 31, 2023, rising $21.8 billion or 8% from $266.4 billion as
at October 31, 2022. At $87.9 billion as at October 31, 2023,
personal deposits increased $9.1 billion since October 31, 2022.
This increase was driven by business growth at Personal Banking, in
both the Wealth Management and Financial Markets segments, and at
ABA Bank.
Business and government deposits totalled $197.3 billion as at
October 31, 2023, rising $13.1 billion since October 31, 2022. This
increase came from the funding activities of the Financial Markets
segment and of Treasury, including $4.9 billion in deposits subject
to bank recapitalization (bail-in) conversion regulations, as well
as from Commercial Banking activities. Deposits from deposit-taking
institutions totalled $3.0 billion as at October 31, 2023,
declining $0.4 billion since the end of fiscal 2022.
Other liabilities, totalling $111.0 billion as at October 31,
2023, decreased $3.1 billion since October 31, 2022, resulting
essentially from an $8.1 billion decrease in obligations related to
securities sold short and a $1.3 billion decrease in liabilities
related to transferred receivables. These decreases were partly
offset by a $4.8 billion increase in obligations related to
securities sold under repurchase agreements and securities loaned
and a $1.1 billion increase in other liabilities, notably interest
and dividends payable.
Subordinated debt decreased since October 31, 2022 as a result
of the Bank's redemption, on February 1, 2023, of $750 million in
medium-term notes.
Equity
As at October 31, 2023, equity attributable to the Bank's
shareholders and holders of other equity instruments totalled $23.7
billion, rising $2.0 billion from $21.7 billion since October 31,
2022. This increase was due to net income net of dividends; to the
issuances of common shares under the Stock Option Plan; and to
accumulated other comprehensive income, notably net unrealized
foreign currency translation gains on investments in foreign
operations and net gains on instruments designated as cash flow
hedges. These increases were partly offset by remeasurements of
pension plans and other post-employment benefit plans as well as by
the net fair value change attributable to the credit risk on
financial liabilities designated at fair value through profit or
loss .
Income Taxes
Notice of Assessment
In March 2023, the Bank was reassessed by the Canada Revenue
Agency (CRA) for additional income tax and interest of
approximately $90 million (including estimated provincial tax and
interest) in respect of certain Canadian dividends received by the
Bank during the 2018 taxation year.
In prior fiscal years, the Bank had been reassessed for
additional income tax and interest of approximately $875 million
(including provincial tax and interest) in respect of certain
Canadian dividends received by the Bank during the 2012-2017
taxation years.
In the reassessments, the CRA alleges that the dividends were
received as part of a "dividend rental arrangement".
In October 2023, the Bank filed a notice of appeal with the Tax
Court of Canada, and the matter is now in litigation. The CRA may
issue reassessments to the Bank for taxation years subsequent to
2018 in regard to certain activities similar to those that were the
subject of the above-mentioned reassessments. The Bank remains
confident that its tax position was appropriate and intends to
vigorously defend its position. As a result, no amount has been
recognized in the consolidated financial statements as at October
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 for the year
ended October 31, 2023.
Proposed Legislation
On November 28, 2023, the Government of Canada released draft
legislation entitled An Act to implement certain provisions of the
fall economic statement tabled in Parliament on November 21, 2023
and certain provisions of the budget tabled in Parliament on March
28, 2023 to implement tax measures applicable to the Bank. The
measures include the denial of the deduction in respect of
dividends received after 2023 on shares that are mark-to-market
property for tax purposes ( except for dividends received on
"taxable preferred shares" as defined in the Income Tax Act) , as
well as the application of a 2% tax on the net value of equity
repurchases occurring as of January 1, 2024.
In its March 28, 2023 budget, the Government of Canada also
proposed to implement the Pillar 2 rules (global minimum tax)
published by the Organisation for Economic Co-operation and
Development (OECD) for fiscal years beginning as of December 31,
2023. To date, the Pillar 2 rules have not yet been included in a
bill in Canada. During fiscal 2023, the Pillar 2 rules were
included in a bill in certain jurisdictions where the Bank
operates.
The federal budget of March 28, 2023 also included another tax
measure on amendments 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). On April 20, 2023, the Government of
Canada tabled Bill C-47 - An Act to implement certain provisions of
the budget tabled in Parliament on March 28, 2023 to implement,
among other things, these amendments to the GST/HST for payment
cards. On June 22, 2023, Bill C-47 received royal assent. Given
that the amendment to the Excise Tax Act had been adopted at the
reporting date, an expense of $25 million was recognized in the
consolidated financial statements for the year ended October 31,
2023.
Event After the Consolidated Balance Sheet Date
Repurchase of Common Shares
On November 30, 2023, the Bank's Board of Directors approved a
normal course issuer bid, beginning December 12, 2023, to
repurchase for cancellation up to 7,000,000 common shares
(representing approximately 2.07% of its then outstanding common
shares) over the 12-month period ending December 11, 2024. 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. This normal course issuer bid is subject to the approval
of OSFI and the Toronto Stock Exchange (TSX).
Capital Management
As at October 31, 2023, the Bank's CET1, Tier 1, and Total
capital ratios were, respectively, 13.5 %, 16.0 % and 16.8 %,
compared to ratios of, respectively, 12.7%, 15.4% and 16.9% as at
October 31, 2022. The CET1 and Tier 1 capital ratios increased
since October 31, 2022, essentially due to the contribution from
net income net of dividends, to common share issuances under the
Stock Option Plan, and to the positive impact from the
implementation of the Basel III reforms related to the credit and
operational risk frameworks. These factors were partly offset by
growth in RWA and by the end of the transitional measures
applicable to expected credit loss provisioning implemented by OSFI
at the beginning of the COVID-19 pandemic. The T otal capital ratio
increased due to the same factors mentioned above, but the increase
was more than offset by the $750 million redemption of medium-term
notes on February 1, 2023.
As at October 31, 2023, the leverage ratio was 4.4% compared to
4.5% as at October 31, 2022. The decrease in the leverage ratio was
essentially due to the growth in total exposure and to the end of
the temporary measure permitted by OSFI with respect to the
exclusion of central bank reserves from the leverage exposure
calculation. These factors were partly offset by the growth in Tier
1 capital.
As at October 31, 2023, the Bank's TLAC ratio and TLAC leverage
ratio were, respectively, 29.2% and 8.0%, compared with 27.7% and
8.1%, respectively, as at October 31, 2022. The increase in the
TLAC ratio was due to the same factors described for the Total
capital ratio as well as to the net instrument issuances that met
the TLAC eligibility criteria during the period. The decrease in
the TLAC leverage ratio was due to the same factors as those
provided for the leverage ratio, partly offset by the net TLAC
instrument issuances.
During the year ended October 31, 2023, the Bank was in
compliance with all of OSFI's regulatory capital, leverage, and
TLAC requirements.
Regulatory Capital (1) , Leverage Ratio(1) and TLAC(2)
As at October As at October
(millions of Canadian dollars) 31, 2023 31, 2022
-------------------------------- ------------- -------------
Capital
CET1 16,920 14,818
Tier 1 20,068 17,961
Total 21,056 19,727
-------------------------------- ------------- -------------
Risk-weighted assets 125,592 116,840
-------------------------------- ------------- -------------
Total exposure 456,478 401,780
-------------------------------- ------------- -------------
Capital ratios
CET1 13.5 % 12.7%
Tier 1 16.0 % 15.4%
Total 16.8 % 16.9%
-------------------------------- ------------- -------------
Leverage ratio 4.4 % 4.5%
-------------------------------- ------------- -------------
Available TLAC 36,732 32,351
TLAC ratio 29.2 % 27.7%
TLAC leverage ratio 8.0 % 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.
Dividends
On November 30, 2023, the Board of Directors declared regular
dividends on the various series of first preferred shares and a
dividend of $1.06 per common share, up 4 cents or 4%, payable on
February 1, 2024 to shareholders of record on December 25,
2023.
Consolidated Balance Sheets
(unaudited) (millions of Canadian dollars)
As at October As at October
31, 2023 31, 2022
------------------------------------------------ ------------- -------------
Assets
Cash and deposits with financial institutions 35,234 31,870
------------------------------------------------ ------------- -------------
Securities
At fair value through profit or loss 99,994 87,375
At fair value through other comprehensive
income 9,242 8,828
At amortized cost 12,582 13,516
------------------------------------------------ ------------- -------------
121,818 109,719
----------------------------------------------- ------------- -------------
Securities purchased under reverse repurchase
agreements
and securities borrowed 11,260 26,486
-------------------------------------------------- ------------- -------------
Loans
Residential mortgage 86,847 80,129
Personal 46,358 45,323
Credit card 2,603 2,389
Business and government 84,192 73,317
------------------------------------------------ ------------- -------------
220,000 201,158
Customers' liability under acceptances 6,627 6,541
Allowances for credit losses (1,184) (955)
------------------------------------------------ ------------- -------------
225,443 206,744
----------------------------------------------- ------------- -------------
Other
Derivative financial instruments 17,516 18,547
Investments in associates and joint ventures 49 140
Premises and equipment 1,592 1,397
Goodwill 1,521 1,519
Intangible assets 1,256 1,360
Other assets 7,889 5,958
------------------------------------------------ ------------- -------------
29,823 28,921
----------------------------------------------- ------------- -------------
423,578 403,740
----------------------------------------------- ------------- -------------
Liabilities and equity
Deposits 288,173 266,394
------------------------------------------------ ------------- -------------
Other
Acceptances 6,627 6,541
Obligations related to securities sold short 13,660 21,817
Obligations related to securities sold under
repurchase agreements
and securities loaned 38,347 33,473
Derivative financial instruments 19,888 19,632
Liabilities related to transferred receivables 25,034 26,277
Other liabilities 7,423 6,361
------------------------------------------------ ------------- -------------
110,979 114,101
----------------------------------------------- ------------- -------------
Subordinated debt 748 1,499
------------------------------------------------ ------------- -------------
Equity
Equity attributable to the Bank's shareholders
and holders of
other equity instruments
Preferred shares and other equity instruments 3,150 3,150
Common shares 3,294 3,196
Contributed surplus 68 56
Retained earnings 16,744 15,140
Accumulated other comprehensive income 420 202
------------------------------------------------ ------------- -------------
23,676 21,744
Non-controlling interests 2 2
------------------------------------------------ ------------- -------------
23,678 21,746
----------------------------------------------- ------------- -------------
423,578 403,740
----------------------------------------------- ------------- -------------
Consolidated Statements of Income
(unaudited) (millions of Canadian dollars)
Quarter ended Year ended October
October 31 31
----------------------------------------------------- --------------- --------------------
2023 2022 2023 2022
----------------------------------------------------- ------- ------ ---------- --------
Interest income
Loans 3,481 2,400 12,676 7,136
Securities at fair value through profit or
loss 500 393 1,681 1,548
Securities at fair value through other comprehensive
income 73 54 279 163
Securities at amortized cost 115 107 473 263
Deposits with financial institutions 433 247 1,668 435
------------------------------------------------------ ------- ------ ---------- --------
4,602 3,201 16,777 9,545
----------------------------------------------------- ------- ------ ---------- --------
Interest expense
Deposits 2,957 1,586 10,015 3,291
Liabilities related to transferred receivables 168 147 633 472
Subordinated debt 11 15 47 28
Other 731 246 2,496 483
------------------------------------------------------ ------- ------ ---------- --------
3,867 1,994 13,191 4,274
----------------------------------------------------- ------- ------ ---------- --------
Net interest income (1) 735 1,207 3,586 5,271
------------------------------------------------------ ------- ------ ---------- --------
Non-interest income
Underwriting and advisory fees 101 94 378 324
Securities brokerage commissions 42 42 174 204
Mutual fund revenues 146 141 578 587
Investment management and trust service fees 262 244 1,005 997
Credit fees 157 125 574 490
Card revenues 49 47 202 186
Deposit and payment service charges 77 78 300 298
Trading revenues (losses) 864 229 2,677 543
Gains (losses) on non-trading securities, net 21 (3) 70 113
Insurance revenues, net 51 26 171 158
Foreign exchange revenues, other than trading 53 57 183 211
Share in the net income of associates and joint
ventures 2 4 11 28
Other 34 43 261 242
------------------------------------------------------ ------- ------ ---------- --------
1,859 1,127 6,584 4,381
----------------------------------------------------- ------- ------ ---------- --------
Total revenues 2,594 2,334 10,170 9,652
------------------------------------------------------ ------- ------ ---------- --------
Non-interest expenses
Compensation and employee benefits 893 831 3,452 3,284
Occupancy 102 83 353 312
Technology 330 227 1,085 915
Communications 15 13 58 57
Professional fees 69 68 257 249
Other 198 124 596 413
------------------------------------------------------ ------- ------ ---------- --------
1,607 1,346 5,801 5,230
----------------------------------------------------- ------- ------ ---------- --------
Income before provisions for credit losses
and income taxes 987 988 4,369 4,422
Provisions for credit losses 115 87 397 145
------------------------------------------------------ ------- ------ ---------- --------
Income before income taxes 872 901 3,972 4,277
Income taxes 104 163 637 894
------------------------------------------------------ ------- ------ ---------- --------
Net income 768 738 3,335 3,383
------------------------------------------------------ ------- ------ ---------- --------
Net income attributable to
Preferred shareholders and holders of other
equity instruments 35 30 141 107
Common shareholders 733 708 3,196 3,277
------------------------------------------------------ ------- ------ ---------- --------
Bank shareholders and holders of other equity
instruments 768 738 3,337 3,384
Non-controlling interests - - (2) (1)
------------------------------------------------------ ------- ------ ---------- --------
768 738 3,335 3,383
----------------------------------------------------- ------- ------ ---------- --------
Earnings per share (dollars)
Basic 2.16 2.10 9.47 9.72
Diluted 2.14 2.08 9.38 9.61
Dividends per common share (dollars) 1.02 0.92 3.98 3.58
------------------------------------------------------ ------- ------ ---------- --------
(1) Net interest income includes dividend income. For additional
information, see Note 1 to the audited annual consolidated
financial statements for the year ended October 31, 2023.
Consolidated Statements of Comprehensive Income
(unaudited) (millions of Canadian dollars)
Quarter ended Year ended October
October 31 31
--------------------------------------------------- ---------------- --------------------
2023 2022 2023 2022
------------------------------------------------------- ------- ------ --------- ---------
Net income 768 738 3,335 3,383
------------------------------------------------------- ------- ------ --------- ---------
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 363 322 155 471
Impact of hedging net foreign currency translation
gains (losses) (111) (97) (52) (138)
252 225 103 333
----------------------------------------------------- ------- ------ --------- ---------
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 (52) (21) (87) (197)
Net (gains) losses on debt securities at fair
value through other comprehensive
income reclassified to net income 25 10 85 91
Change in allowances for credit losses on
debt securities at fair value through
other comprehensive income reclassified to
net income - 1 1 1
---------------------------------------------------- ------- ------ --------- ---------
(27) (10) (1) (105)
--------------------------------------------------- ------- ------ --------- ---------
Net change in cash flow hedges
Net gains (losses) on derivative financial
instruments designated as cash flow hedges (35) (50) 90 (25)
Net (gains) losses on designated derivative
financial instruments reclassified
to net income (7) 10 25 33
---------------------------------------------------- ------- ------ --------- ---------
(42) (40) 115 8
--------------------------------------------------- ------- ------ --------- ---------
Share in the other comprehensive income of
associates and joint ventures - - 1 (2)
----------------------------------------------------- ------- ------ --------- ---------
Items that will not be subsequently reclassified
to net income
Remeasurements of pension plans and other
post-employment benefit plans (44) (257) (140) (126)
Net gains (losses) on equity securities designated
at fair value through
other comprehensive income 40 (1) 45 (27)
Net fair value change attributable to the
credit risk on financial liabilities
designated at fair value through profit or
loss 72 10 (163) 601
---------------------------------------------------- ------- ------ --------- ---------
68 (248) (258) 448
--------------------------------------------------- ------- ------ --------- ---------
Total other comprehensive income, net of income
taxes 251 (73) (40) 682
------------------------------------------------------- ------- ------ --------- ---------
Comprehensive income 1,019 665 3,295 4,065
------------------------------------------------------- ------- ------ --------- ---------
Comprehensive income attributable to
Bank shareholders and holders of other equity
instruments 1,019 665 3,297 4,066
Non-controlling interests - - (2) (1)
------------------------------------------------------ ------- ------ --------- ---------
1,019 665 3,295 4,065
------------------------------------------------------ ------- ------ --------- ---------
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.
Year ended October
Quarter ended October 31 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 (10) (9) (3) (13)
Impact of hedging net foreign currency translation
gains (losses) (27) (19) (14) (28)
----------------------------------------------------- ---- ----- --------- ---------
(37) (28) (17) (41)
--------------------------------------------------- ---- ----- --------- ---------
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 (19) (8) (33) (71)
Net (gains) losses on debt securities at fair
value through other comprehensive income
reclassified to net income 10 3 33 32
Change in allowances for credit losses on
debt securities at fair value through
other comprehensive income reclassified to
net income - - - -
---------------------------------------------------- ---- ----- --------- ---------
(9) (5) - (39)
--------------------------------------------------- ---- ----- --------- ---------
Net change in cash flow hedges
Net gains (losses) on derivative financial
instruments designated as cash flow hedges (13) (18) 35 (9)
Net (gains) losses on designated derivative
financial instruments reclassified
to net income (4) 4 9 12
----------------------------------------------------- ---- ----- --------- ---------
(17) (14) 44 3
--------------------------------------------------- ---- ----- --------- ---------
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 (16) (92) (43) (45)
Net gains (losses) on equity securities designated
at fair value through
other comprehensive income 6 (1) 8 (10)
Net fair value change attributable to the
credit risk on financial liabilities
designated at fair value through profit or
loss 28 4 (63) 216
----------------------------------------------------- ---- ----- --------- ---------
18 (89) (98) 161
---- ----- --------- ---------
(45) (135) (71) 84
------------------------------------------------------ ---- ----- --------- ---------
Consolidated Statements of Changes in Equity
(unaudited) (millions of Canadian dollars)
Year ended October 31
----------------------------------------------------------- --------------------------
2023 2022
------------------------------------------------------------ ----------- ----------
Preferred shares and other equity instruments at
beginning 3,150 2,650
Issuances of preferred shares and other equity instruments - 500
Preferred shares and other equity instruments at
end 3,150 3,150
------------------------------------------------------------ ----------- ----------
Common shares at beginning 3,196 3,160
Issuances of common shares pursuant to the Stock
Option Plan 95 61
Repurchases of common shares for cancellation - (24)
Impact of shares purchased or sold for trading 3 (1)
Common shares at end 3,294 3,196
------------------------------------------------------------ ----------- ----------
Contributed surplus at beginning 56 47
Stock option expense 18 17
Stock options exercised (10) (7)
Other 4 (1)
------------------------------------------------------------ ----------- ----------
Contributed surplus at end 68 56
------------------------------------------------------------ ----------- ----------
Retained earnings at beginning 15,140 12,854
Net income attributable to the Bank's shareholders
and holders of other equity instruments 3,337 3,384
Dividends on preferred shares and distributions on
other equity instruments (163) (119)
Dividends on common shares (1,344) (1,206)
Premium paid on common shares repurchased for cancellation - (221)
Issuance expenses for shares and other equity instruments,
net of income taxes - (4)
Remeasurements of pension plans and other post-employment
benefit plans (140) (126)
Net gains (losses) on equity securities designated
at fair value through other comprehensive income 45 (27)
Net fair value change attributable to the credit
risk on financial liabilities
designated at fair value through profit or loss (163) 601
Impact of a financial liability resulting from put
options written to non-controlling interests 10 (8)
Other 22 12
------------------------------------------------------------ ----------- ----------
Retained earnings at end 16,744 15,140
------------------------------------------------------------ ----------- ----------
Accumulated other comprehensive income at beginning 202 (32)
Net foreign currency translation adjustments 103 333
Net change in unrealized gains (losses) on debt securities
at fair value through other comprehensive income (1) (105)
Net change in gains (losses) on cash flow hedges 115 8
Share in the other comprehensive income of associates
and joint ventures 1 (2)
------------------------------------------------------------ ----------- ----------
Accumulated other comprehensive income at end 420 202
------------------------------------------------------------ ----------- ----------
Equity attributable to the Bank's shareholders and
holders of other equity instruments 23,676 21,744
------------------------------------------------------------ ----------- ----------
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 23,678 21,746
------------------------------------------------------------ ----------- ----------
Accumulated Other Comprehensive Income
As at October As at October
31, 2023 31, 2022
------------------------------------------------------ ------------- -------------
Accumulated other comprehensive income
Net foreign currency translation adjustments 307 204
Net unrealized gains (losses) on debt securities at
fair value through other comprehensive income (35) (34)
Net gains (losses) on instruments designated as cash
flow hedges 146 31
Share in the other comprehensive income of associates
and joint ventures 2 1
------------------------------------------------------- ------------- -------------
420 202
------------------------------------------------------ ------------- -------------
Segment Disclosures
(unaudited) (millions of Canadian dollars)
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
related to cloud computing arrangements applied in fiscal 2022.
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.
Results by Business Segment
Quarter ended October 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) 857 785 188 187 (440) 113 291 277 (161) (155) 735 1,207
Non-interest
income(2) 295 286 450 426 1,175 450 22 (10) (83) (25) 1,859 1,127
------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Total revenues 1,152 1,071 638 613 735 563 313 267 (244) (180) 2,594 2,334
Non-interest
expenses(3)(4)(5) 690 574 423 349 319 254 106 90 69 79 1,607 1,346
------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Income before
provisions
for credit
losses and income
taxes 462 497 215 264 416 309 207 177 (313) (259) 987 988
Provisions for
credit
losses 65 42 1 2 24 32 23 10 2 1 115 87
------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Income before
income
taxes (recovery) 397 455 214 262 392 277 184 167 (315) (260) 872 901
Income taxes
(recovery)(2) 109 120 59 69 108 74 39 35 (211) (135) 104 163
------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Net income 288 335 155 193 284 203 145 132 (104) (125) 768 738
Non-controlling
interests - - - - - - - - - - - -
------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Net income
attributable
to the Bank's
shareholders
and holders of
other
equity
instruments 288 335 155 193 284 203 145 132 (104) (125) 768 738
------------------ ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Average assets(6) 151,625 145,145 8,494 8,582 193,484 160,778 24,258 20,395 64,134 74,921 441,995 409,821
------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Total assets 154,728 146,668 8,666 8,486 178,784 157,803 25,308 21,217 56,092 69,566 423,578 403,740
------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Year ended October 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(7) 3,321 2,865 778 594 (1,054) 1,258 1,132 1,090 (591) (536) 3,586 5,271
Non-interest
income(7)(8) 1,195 1,169 1,743 1,781 3,710 1,210 77 20 (141) 201 6,584 4,381
---------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Total revenues 4,516 4,034 2,521 2,375 2,656 2,468 1,209 1,110 (732) (335) 10,170 9,652
Non-interest
expenses(3)(4)(5)(9) 2,510 2,241 1,534 1,417 1,161 1,029 402 344 194 199 5,801 5,230
---------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Income before
provisions
for credit
losses and income
taxes 2,006 1,793 987 958 1,495 1,439 807 766 (926) (534) 4,369 4,422
Provisions for credit
losses 238 97 2 3 39 (23) 113 66 5 2 397 145
---------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Income before income
taxes (recovery) 1,768 1,696 985 955 1,456 1,462 694 700 (931) (536) 3,972 4,277
Income taxes
(recovery)(7)(10) 486 449 271 254 401 388 146 143 (667) (340) 637 894
---------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Net income 1,282 1,247 714 701 1,055 1,074 548 557 (264) (196) 3,335 3,383
Non-controlling
interests - - - - - - - - (2) (1) (2) (1)
---------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Net income
attributable
to the Bank's
shareholders
and
holders of other
equity instruments 1,282 1,247 714 701 1,055 1,074 548 557 (262) (195) 3,337 3,384
--------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Average assets(6) 148,511 140,300 8,560 8,440 180,837 154,349 23,007 18,890 69,731 71,868 430,646 393,847
---------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
Total assets 154,728 146,668 8,666 8,486 178,784 157,803 25,308 21,217 56,092 69,566 423,578 403,740
---------------------- ------- ------- ----- ----- ------- ------- ------ ------ ------ ------ ------- -------
(1) For the quarter and year ended October 31, 2022, certain
amounts were reclassified, notably due to a revised method for the
sectoral allocation of technology investment expenses.
(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 $90 million ($65
million in 2022), Non-interest income was grossed up by $75 million
($30 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 year ended October 31, 2023, the Bank
recorded $75 million in intangible asset impairment losses ($54
million net of income taxes) on technology development, and it
recorded $11 million in impairment losses on premises and equipment
($8 million net of income taxes) related to right-of-use
assets.
(4) During the quarter and year ended October 31, 2023, the Bank
recorded $35 million in litigation expenses ($26 million net of
income taxes) to resolve litigations and other disputes arising
from various ongoing or potential claims against the Bank.
(5) During the quarter and year ended October 31, 2023, the Bank
recorded $15 million in charges ($11 million net of income taxes)
for contract termination penalties and for provisions for onerous
contracts.
(6) 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.
(7) During the year ended October 31, 2023, for the business
segments as a whole, Net interest income was grossed up by $332
million ($234 million in 2022), Non-interest income was grossed up
by $247 million ($48 million in 2022), and an equivalent amount was
recognized in Income taxes (recovery). The effect of these
adjustments is reversed under the Other heading.
(8) During the year ended October 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.
(9) During the year ended October 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).
(10) During the year ended October 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 the 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
24 to the audited annual consolidated financial statements for the
year ended October 31, 2023.
Caution Regarding Forward Looking Statements
Certain statements in this document are forward-looking
statements. All such statements are made in accordance with
applicable securities legislation in Canada and the United States.
The forward-looking statements in this document may include, but
are not limited to, statements made in the Message From the
President and Chief Executive Officer on the 2023 Annual Report and
other statements about the economy, market changes, the Bank's
objectives, outlook, and priorities for fiscal year 2024 and
beyond, the strategies or actions that will be taken to achieve
them, expectations for the Bank's financial condition, its
activities, the regulatory environment in which it operates, its
environmental, social, and governance targets and commitments, and
certain risks to which the Bank is exposed. These forward-looking
statements are typically identified by verbs or words such as
"outlook", "believe", "foresee", "forecast", "anticipate",
"estimate", "project", "expect", "intend" and "plan", in their
future or conditional forms, notably verbs such as "will", "may",
"should", "could" or "would" as well as similar terms and
expressions.
Such forward-looking statements are made for the purpose of
assisting the holders of the Bank's securities in understanding the
Bank's financial position and results of operations as at and for
the periods ended on the dates presented, as well as the Bank's
vision, strategic objectives, and performance targets, and may not
be appropriate for other purposes. These forward-looking statements
are based on current expectations, estimates, assumptions and
intentions and are subject to uncertainty and inherent risks, many
of which are beyond the Bank's control. There is a strong
possibility that the Bank's express or implied predictions,
forecasts, projections, expectations, or conclusions will not prove
to be accurate, that its assumptions may not be confirmed and that
its vision, strategic objectives, and performance targets will not
be achieved. The Bank cautions investors that these forward-looking
statements are not guarantees of future performance and that actual
events or results may differ significantly from these statements
due to a number of factors. Thus, the Bank recommends that readers
not place undue reliance on these forward-looking statements, as a
number of factors could cause actual results to differ
significantly from the expectations, estimates, or intentions
expressed in these forward-looking statements. Investors and others
who rely on the Bank's forward-looking statements should carefully
consider the factors listed below as well as the uncertainties they
represent and the risk they entail. Except as required by law, the
Bank does not undertake to update any forward-looking statements,
whether written or oral, that may be made from time to time, by it
or on its behalf.
Assumptions about the performance of the Canadian and U.S.
economies in 2024 and how that performance will affect the Bank's
business are among the factors considered in setting the Bank's
strategic priorities and objectives, including provisions for
credit losses. These assumptions appear in the 2023 Annual Report
in the Economic Review and Outlook section and, for each business
segment, in the Economic and Market Review sections, and may be
updated in the quarterly reports to shareholders.
The forward-looking statements made in this document are based
on a number of assumptions and are subject to risk factors, many of
which are beyond the Bank's control and the impacts of which are
difficult to predict. These risk factors include, among others, the
general economic environment and financial market conditions in
Canada, the United States, and the other countries where the Bank
operates; the impact of upheavals in the U.S. banking industry;
exchange rate and interest rate fluctuations; inflation; global
supply chain disruptions; higher funding costs and greater market
volatility; changes made to fiscal, monetary, and other public
policies; changes made to regulations that affect the Bank's
business; geopolitical and sociopolitical uncertainty; climate
change, including physical risks and those related to the
transition to a low-carbon economy, and the Bank's ability to
satisfy stakeholder expectations on environmental and social
issues; significant changes in consumer behaviour; the housing
situation, real estate market, and household indebtedness in
Canada; the Bank's ability to achieve its key short-term priorities
and long-term strategies; the timely development and launch of new
products and services; the Bank's ability to recruit and retain key
personnel; technological innovation, including advances in
artificial intelligence and the open banking system, and heightened
competition from established companies and from competitors
offering non-traditional services; changes in the performance and
creditworthiness of the Bank's clients and counterparties; the
Bank's exposure to significant regulatory matters or litigation;
changes made to the accounting policies used by the Bank to report
financial information, including the uncertainty inherent to
assumptions and critical accounting estimates; changes to tax
legislation in the countries where the Bank operates; changes made
to capital and liquidity guidelines as well as to the presentation
and interpretation thereof; changes to the credit ratings assigned
to the Bank by financial and extra-financial rating agencies;
potential disruptions to key suppliers of goods and services to the
Bank; the potential impacts of disruptions to the Bank's
information technology systems, including cyberattacks as well as
identity theft and theft of personal information; the risk of
fraudulent activity; and possible impacts of major events affecting
the economy, market conditions, or the Bank's outlook, including
international conflicts, natural disasters, public health crises,
and the measures taken in response to these events.
The foregoing list of risk factors is not exhaustive, and the
forward-looking statements made in this document are also subject
to credit risk, market risk, liquidity and funding risk,
operational risk, regulatory compliance risk, reputation risk,
strategic risk, and social and environmental risk as well as
certain emerging risks or risks deemed significant. Additional
information about these risk factors is provided in the Risk
Management section beginning on page 62 of the 2023 Annual Report
and may be updated in the quarterly shareholder's reports
subsequently published.
Information for Shareholders and Investors
Disclosure of Fourth Quarter 2023 Results
Conference Call
-- A conference call for analysts and institutional investors
will be held on Friday, December 1, 2023 at 11:00 a.m. ET.
-- Access by telephone in listen-only mode: 1-800-806-5484 or
416-340-2217. The access code is 3705216#.
-- A recording of the conference call can be heard until March
1, 2024 by dialing 1-800-408-3053 or 905-694-9451. The access code
is 4238787# .
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 Press Release (which includes the quarterly consolidated
financial statements) is available at all times on National Bank's
website at nbc.ca/investorrelations .
-- The Press Release, 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.
-- The 2023 Annual Report (which includes the audited annual
consolidated financial statements and management's discussion and
analysis) will also be available on National Bank's website.
-- The Report to Shareholders for the first quarter ended
January 31, 2024 will be available on February 28, 2024 (subject to
approval by the Bank's Board of Directors).
For more information
-- Marianne Ratté, Vice-President and Head - Investor Relations, 1-866-517-5455
-- Debby Cordeiro, Senior Vice-President - Communication, Public
Affairs and ESG, 514-412-0538
This information is provided by RNS, the news service of the
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END
FR EADAFEEDDFFA
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