Notes to the Audited Consolidated Financial
Statements
|
Note 1
|
Basis of Presentation and Summary
of Material Accounting Policies
|
146
|
Note
18
|
Derivative Financial
Instruments
|
198
|
|
Note 2
|
Accounting Policy
Changes
|
162
|
Note
19
|
Hedging Activities
|
201
|
|
Note 3
|
Future Accounting Policy
Changes
|
163
|
Note
20
|
Share Capital and Other Equity
Instruments
|
207
|
|
Note 4
|
Fair Value of Financial
Instruments
|
164
|
Note
21
|
Non-Controlling
Interests
|
210
|
|
Note 5
|
Financial Instruments Designated
at Fair Value Through Profit or Loss
|
175
|
Note
22
|
Capital Disclosure
|
211
|
|
Note 6
|
Offsetting Financial Assets and
Financial Liabilities
|
176
|
Note
23
|
Trading Activity
Revenues
|
212
|
|
Note 7
|
Securities
|
177
|
Note
24
|
Share-Based Payments
|
213
|
|
Note 8
|
Loans and Allowances for Credit
Losses
|
179
|
Note
25
|
Employee Benefits - Pension Plans
and Other
|
|
|
Note 9
|
Financial Assets Transferred But
Not Derecognized
|
191
|
|
Post-Employment Benefit
Plans
|
216
|
|
Note 10
|
Investments in Associates and
Joint Ventures
|
192
|
Note
26
|
Income Taxes
|
220
|
|
Note 11
|
Premises and Equipment
|
193
|
Note
27
|
Earnings Per Share
|
223
|
|
Note 12
|
Goodwill and Intangible
Assets
|
194
|
Note
28
|
Guarantees, Commitments and
Contingent Liabilities
|
224
|
|
Note 13
|
Other Assets
|
195
|
Note
29
|
Structured Entities
|
226
|
|
Note 14
|
Deposits
|
196
|
Note
30
|
Related Party
Disclosures
|
229
|
|
Note 15
|
Other Liabilities
|
196
|
Note
31
|
Financial Instruments Risk
Management
|
230
|
|
Note 16
|
Subscription Receipts
|
197
|
Note
32
|
Segment Disclosures
|
235
|
|
Note 17
|
Subordinated Debt
|
197
|
Note
33
|
Acquisition
|
237
|
Note 1 - Basis of Presentation and Summary of Material
Accounting Policies
National Bank of Canada (the Bank) is a financial
institution incorporated and domiciled in Canada and whose shares
are listed on the Toronto Stock Exchange. Its head office is
located at 800 Saint-Jacques Street in Montreal, Quebec, Canada.
The Bank is a chartered bank under Schedule 1 of the Bank Act (Canada) and is regulated by
the Office of the Superintendent of Financial Institutions (Canada)
(OSFI). The Bank offers financial services to individuals,
businesses, institutional clients, and governments throughout
Canada as well as specialized services at the international level.
It operates four business segments: the Personal and Commercial
segment, the Wealth Management segment, the Financial Markets
segment, and the U.S. Specialty Finance and International
(USSF&I) segment. Its full line of services includes banking
and investing solutions for individuals and businesses, corporate
banking and investment banking services, securities brokerage,
insurance, and wealth management.
On December 3, 2024, the Board of Directors (the
Board) authorized the publication of the Bank's audited annual
Consolidated Financial Statements (the Consolidated Financial
Statements) for the year ended October 31, 2024.
Basis of Presentation
The Bank's Consolidated Financial Statements are
prepared in accordance with International Financial Reporting
Standards (IFRS Accounting Standards), as issued by the
International Accounting Standards Board (IASB). The financial
statements also comply with section 308(4) of the Bank Act (Canada), which states that,
except as otherwise specified by OSFI, the Consolidated Financial
Statements are to be prepared in accordance with IFRS Accounting
Standards. IFRS Accounting Standards represent Canadian generally
accepted accounting principles (GAAP). None of the OSFI accounting
requirements are exceptions to IFRS Accounting Standards. The
accounting policies described in the Summary of Material Accounting
Policies section have been applied consistently to all periods
presented.
Unless otherwise indicated, all amounts are
expressed in Canadian dollars, which is the Bank's functional and
presentation currency.
Interest Rate Benchmark Reform
The reform of interbank offered
rates (IBORs) and other interest rate benchmarks is a global
initiative being coordinated and led by central banks and
governments around the world, including those in Canada. This
reform has been unfolding for several years, with the IASB
monitoring developments. To minimize the financial statement
impacts arising from replacing current interest rate benchmarks
with alternative benchmarks, the IASB amended certain IFRS
Accounting Standards and allowed for some temporary exemptions,
notably in the area of hedge accounting.
On December 31, 2021, all LIBOR
(London Interbank Offered Rates) rates in European, British, Swiss,
and Japanese currencies as well as the one-week and two-month USD
LIBOR rates were discontinued, whereas the other USD LIBOR rates
were discontinued as of June 30, 2023.
In Canada, CDOR (Canadian
Dollar Offered Rate) ceased to be published on June 28, 2024
and was replaced by risk-free rates CORRA (Canadian Overnight Repo
Rate Average) and term CORRA. As a result, the Bank ceased to grant
loans based on bankers' acceptances and, consistent with its plan,
it no longer has financial instruments referencing CDOR in its
Consolidated Financial Statements as at October 31,
2024.
Summary of Material Accounting Policies
Judgments,
Estimates and Assumptions
In preparing Consolidated Financial Statements in
accordance with IFRS Accounting Standards, management must exercise
judgment and make estimates and assumptions that affect the
reporting date carrying amounts of assets and liabilities, net
income, and related information. Furthermore, certain accounting
policies require complex judgments and estimates because they apply
to matters that are inherently uncertain, in particular accounting
policies applicable to the following: the fair value determination
of financial instruments, the impairment of financial assets, the
impairment of non-financial assets, pension plans and other
post-employment benefits, income taxes, provisions, the
consolidation of structured entities, and the classification of
debt instruments. Descriptions of these judgments and estimates are
provided in each of the notes related thereto in the Consolidated
Financial Statements. Actual results could therefore differ from
these estimates, in which case the impacts are recognized in the
Consolidated Financial Statements of future fiscal periods. The
accounting policies described in this note provide greater detail
about the use of estimates and assumptions and reliance on
judgment.
The geopolitical landscape (notably, the
Russia-Ukraine war and the clashes between Israel and Hamas),
inflation, climate change, and high interest rates continue to
create uncertainty. As a result, establishing reliable estimates
and applying judgment continue to be substantially complex. The
uncertainty surrounding certain key inputs used in measuring
expected credit losses is described in Note 8 to these Consolidated
Financial Statements.
Basis of
Consolidation
Subsidiaries
These Consolidated Financial Statements include all
the assets, liabilities, operating results and cash flows of the
Bank and its subsidiaries, after elimination of intercompany
transactions and balances. Subsidiaries are entities, including
structured entities, controlled by the Bank. A structured entity is
an entity created to accomplish a narrow and well-defined objective
and is designed so that voting or similar rights are not the
dominant factor in deciding who controls the entity, such as when
voting rights relate solely to administrative tasks and the
relevant activities are directed by means of contractual
arrangements.
Management must exercise judgment in determining
whether the Bank must consolidate an entity. The Bank controls an
entity only if the following three conditions are met:
·
it has decision-making authority regarding the
entity's relevant activities;
·
it has exposure or rights to variable returns
from its involvement with the entity;
·
it has the ability to use its power to affect the
amount of the returns.
When determining decision-making authority, the
Bank considers many factors, including the existence and effect of
actual and potential voting rights held by the Bank that can be
exercised as well as the holding of instruments that are
convertible into voting shares. In addition, the Bank must
determine whether, as an investor with decision-making rights, it
acts as a principal or agent.
Based on these principles, an assessment of control
is performed at the inception of a relationship between any entity
and the Bank. When performing this assessment, the Bank considers
all facts and circumstances, and it must reassess whether it still
controls an investee if facts and circumstances indicate that one
or more of the three conditions of control have changed.
The Bank consolidates the entities it controls from
the date on which control is obtained and ceases to consolidate
them from the date control ceases. The Bank uses the acquisition
method to account for the acquisition of a subsidiary from a third
party on the date control is obtained.
Non-Controlling
Interests
Non-controlling interests in subsidiaries represent
the equity interests held by third parties in the Bank's
subsidiaries and are presented in total Equity, separately from Equity attributable to the Bank's
shareholders and holders
of other equity instruments. The non-controlling interests'
proportionate shares of the net income and other comprehensive
income of the Bank's subsidiaries are presented separately in the
Consolidated Statement of Income and in the Consolidated Statement
of Comprehensive Income, respectively.
With respect to units issued to third parties by
mutual funds and certain other funds that are consolidated, they
are presented at fair value in Other liabilities in the Consolidated
Balance Sheet. Lastly, changes in ownership interests in
subsidiaries that do not result in a loss of control are recognized
as equity transactions. The difference between the adjustment in
the carrying value of the non-controlling interest and the fair
value of the consideration paid or received is recognized directly
in Equity attributable to the
Bank's shareholders and
holders of other equity instruments.
Note 1 - Basis of Presentation and
Summary of Material Accounting Policies (cont.)
Investments in Associates and
Joint Ventures
The Bank exercises significant influence over
an entity when it has the power to participate in the financial and
operating policy decisions of the investee. The Bank has joint
control when there is a contractually agreed sharing of control of
an entity, and joint control exists only when decisions about the
relevant activities require the unanimous consent of the parties
sharing control.
Investments in associates, i.e., entities over which
the Bank exercises significant influence, and investments in joint
ventures, i.e., entities over which the Bank has rights to the net
assets and exercises joint control, are accounted for using the
equity method. Under the equity method, the investment is initially
recorded at cost and, thereafter, the carrying amount is increased
or decreased by the Bank's proportionate share of net income,
recognized in Non-interest
income in the Consolidated Statement of Income, and by the
proportionate share in other comprehensive income, recognized in
Other comprehensive income
in the Consolidated Statement of Comprehensive Income.
Distributions received reduce the carrying amount of the
interest.
Translation
of Foreign
Currencies
The Consolidated Financial Statements are presented
in Canadian dollars, which is the Bank's functional and
presentation currency. Each foreign operation within the Bank's
scope of consolidation determines its own functional currency, and
the items reported in the financial statements of each foreign
operation are measured using that currency.
Monetary items and non-monetary items measured at
fair value and denominated in foreign currencies are translated
into the functional currency at exchange rates prevailing at the
Consolidated Balance Sheet date. Non-monetary items not measured at
fair value are translated into the functional currency at
historical rates. Revenues and expenses denominated in foreign
currencies are translated at the average exchange rates for the
period. Translation gains and losses are recognized in Non-interest income in the
Consolidated Statement of Income, except for equity instruments
designated at fair value through other comprehensive income, for
which unrealized gains and losses are recorded in Other comprehensive income and will
not be subsequently reclassified to net income.
In the Consolidated Financial Statements, the assets
and liabilities of all foreign operations are translated into the
Bank's functional currency at the exchange rates prevailing at the
Consolidated Balance Sheet date, whereas the revenues and expenses
of such foreign operations are translated into the Bank's
functional currency at the average exchange rates for the period.
Any goodwill resulting from the acquisition of a foreign operation
that does not have the same functional currency as the parent
company, and any fair value adjustments to the carrying amounts of
assets and liabilities resulting from the acquisition, are treated
as assets and liabilities of the foreign operation and translated
at the exchange rates prevailing at the Consolidated Balance Sheet
date. Unrealized translation gains and losses related to foreign
operations, including the impact of hedges and income taxes on the
related results, are presented in Other comprehensive income. Upon
disposal of a foreign operation, any accumulated translation gains
and losses, along with the related hedges, recorded under the
Accumulated other comprehensive
income item of this foreign operation, are reclassified to
Non-interest income in the
Consolidated Statement of Income.
Classification and
Measurement of Financial Instruments
At initial recognition, all financial instruments
are recorded at fair value in the Consolidated Balance Sheet. At
initial recognition, financial assets must be classified as
subsequently measured at fair value through other comprehensive
income, at amortized cost, or at fair value through profit or loss.
The Bank determines the classification based on the contractual
cash flow characteristics of the financial assets and on the
business model it uses to manage these financial assets. At initial
recognition, financial liabilities are classified as subsequently
measured at amortized cost or as at fair value through profit or
loss.
For the purpose of classifying a financial asset,
the Bank must determine whether the contractual cash flows
associated with the financial asset are solely payments of
principal and interest on the principal amount outstanding. The
principal is generally the fair value of the financial asset at
initial recognition. The interest consists of consideration for the
time value of money, for the credit risk associated with the
principal amount outstanding during a particular period, and for
other basic lending risks and costs as well as of a profit margin.
If the Bank determines that the contractual cash flows associated
with a financial asset are not solely payments of principal and
interest, the financial assets must be classified as measured at
fair value through profit or loss.
When classifying financial assets, the Bank
determines the business model used for each portfolio of financial
assets that are managed together to achieve a same business
objective. The business model reflects how the Bank manages its
financial assets and the extent to which the financial asset cash
flows are generated by the collection of the contractual cash
flows, the sale of the financial assets, or both. The Bank
determines the business model using scenarios that it reasonably
expects to occur. Consequently, the business model determination is
a matter of fact and requires the use of judgment and consideration
of all the relevant evidence available to the Bank at the date of
determination.
A financial asset portfolio falls within a "hold to
collect" business model when the Bank's primary objective is to
hold these financial assets in order to collect contractual cash
flows from them and not to sell them. When the Bank's objective is
achieved both by collecting contractual cash flows and by selling
the financial assets, the financial asset portfolio falls within a
"hold to collect and sell" business model. In this type of business
model, collecting contractual cash flows and selling financial
assets are both integral components to achieving the Bank's
objective for this financial asset portfolio. Financial assets are
mandatorily measured at fair value through profit or loss if they
do not fall within either a "hold to collect" business model or a
"hold to collect and sell" business model.
Financial Instruments Designated
at Fair Value Through Profit or Loss
A financial asset may be irrevocably designated at
fair value through profit or loss at initial recognition if certain
conditions are met. The Bank may apply this option if doing so
eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise from measuring financial
assets or liabilities or recognizing gains and losses on them on
different bases, and if the fair values are reliable. Financial
assets thus designated are recognized at fair value, and any change
in fair value is recorded in Non-interest income in the
Consolidated Statement of Income. Interest income arising from
these financial instruments designated at fair value through profit
or loss is recorded in Net
interest income in
the Consolidated Statement of Income.
A financial liability may be irrevocably designated
at fair value through profit or loss when it is initially
recognized. Financial liabilities thus designated are recognized at
fair value, and any changes in fair value attributable to changes
in the Bank's own credit risk are recognized in Other comprehensive income unless
these changes create or enlarge an accounting mismatch in
Net income. Fair value
changes not attributable to the Bank's own credit risk are
recognized in Non‑interest
income in the Consolidated Statement of Income. The amounts
recognized in Other comprehensive
income will not be subsequently reclassified to Net income. Interest expense arising
from these financial liabilities designated at fair value through
profit or loss is recorded in the Net interest income item of the
Consolidated Statement of Income. The Bank may use this option in
the following cases:
·
if doing so eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise arise
from measuring financial assets or liabilities or recognizing gains
and losses on them on different bases, and if the fair values are
reliable;
·
if a group of financial assets and financial
liabilities to which an instrument belongs is managed and its
performance is evaluated on a fair value basis, in accordance with
the Bank's documented risk management or investment strategy, and
information is provided on that basis to senior management.
Consequently, the Bank may use this option if it has implemented a
documented risk management strategy to manage a group of financial
instruments together on the fair value basis, if it can demonstrate
that significant financial risks are eliminated or significantly
reduced, and if the fair values are reliable;
·
for hybrid financial instruments with one or more
embedded derivatives that would significantly modify the cash flows
of the financial instruments and that would otherwise be bifurcated
and accounted for separately.
Financial Instruments Designated
at Fair Value Through Other Comprehensive Income
At initial recognition, an investment in an equity
instrument that is neither held for trading nor a contingent
consideration recognized in a business combination may be
irrevocably designated as being at fair value through other
comprehensive income. In accordance with this designation, any
change in fair value is recognized in Other comprehensive income with no
subsequent reclassification to net income. Dividend income is
recorded in Interest
income in the Consolidated Statement of Income.
Securities Measured at Fair Value
Through Other Comprehensive Income
Securities measured at fair value through other
comprehensive income include: (i) debt securities for which the
contractual terms of the financial asset give rise, on specified
dates, to cash flows that are solely payments of principal and
interest on the principal amount outstanding and that fall within a
"hold to collect and sell" business model and (ii) equity
securities designated at fair value through other comprehensive
income with no subsequent reclassification of gains and losses to
net income.
The Bank recognizes securities transactions at fair
value through other comprehensive income on the trade date, and the
transaction costs are capitalized. Interest income and dividend
income are recognized in Interest
income in the Consolidated Statement of Income.
Debt Securities
Measured at Fair Value Through Other Comprehensive
Income
Debt securities measured at fair value through other
comprehensive income are recognized at fair value. Unrealized gains
and losses are recognized, net of expected credit losses and
related income taxes, and provided that they are not hedged by
derivative financial instruments in a fair value hedging
relationship, in Other
comprehensive income. When the securities are sold, realized
gains or losses, determined on an average cost basis, are
reclassified to Non-interest
income - Gains (losses) on non-trading securities, net in
the Consolidated Statement of Income. Premiums, discounts and
related transaction costs are amortized to interest income over the
expected life of the instrument using the effective interest rate
method.
Note 1 - Basis of Presentation and
Summary of Material Accounting Policies (cont.)
Equity Securities
Designated at Fair Value Through Other Comprehensive
Income
Equity securities designated at fair value through
other comprehensive income are recognized at fair value. Unrealized
gains and losses are presented, net of income taxes, in
Other comprehensive income
with no subsequent reclassification of realized gains and losses to
net income. Transaction costs incurred upon the purchase of such
equity securities are not reclassified to net income upon the sale
of the securities.
Securities Measured at Amortized
Cost
Securities measured at amortized cost include debt
securities for which the contractual terms give rise, on specified
dates, to cash flows that are solely payments of principal and
interest on the principal amount outstanding and that fall within a
"hold to collect" business model.
The Bank recognizes these securities transactions at
fair value on the trade date, and the transaction costs are
capitalized. After initial recognition, debt securities in this
category are recorded at amortized cost. Interest income is
recognized in Interest
income in the Consolidated Statement of Income. Premiums,
discounts and related transaction costs are amortized to interest
income over the expected life of the instrument using the effective
interest rate method. Securities measured at amortized cost are
presented net of allowances for credit losses in the Consolidated
Balance Sheet.
Securities Measured at Fair Value
Through Profit or Loss
Securities not classified or designated as measured
at fair value through other comprehensive income or at amortized
cost are classified as measured at fair value through profit or
loss.
Securities measured at fair value through profit or
loss include (i) securities held for trading, (ii) securities
designated at fair value through profit or loss, (iii) all equity
securities other than those designated as measured at fair value
through other comprehensive income with no subsequent
reclassifications of gains and losses to net income, and (iv) debt
securities for which the contractual cash flows are not solely
payments of principal and any interest on any principal amount
outstanding.
The Bank recognizes securities transactions at fair
value through profit or loss on the settlement date in the
Consolidated Balance Sheet. Changes in fair value between the trade
date and the settlement date are recognized in Non-interest income in the
Consolidated Statement of Income.
Securities at fair value through profit or loss are
recognized at fair value. Interest income, any transaction costs,
as well as realized and unrealized gains or losses on securities
held for trading are recognized in Non-interest income - Trading revenues
(losses) in the Consolidated Statement of Income. Dividend
income is recorded in Interest
income in the Consolidated Statement of Income. Interest
income on securities designated at fair value through profit or
loss is recorded in Interest
income in the Consolidated Statement of Income. Realized and
unrealized gains or losses on these securities are recognized in
Non‑interest income - Trading
revenues (losses) in the Consolidated Statement of
Income.
Realized and unrealized gains or losses on equity
securities at fair value through profit or loss, other than those
held for trading, as well as debt securities for which the
contractual cash flows are not solely payments of principal and
interest on the principal amount outstanding, are recognized under
Non-interest income - Gains
(losses) on non-trading securities, net in the
Consolidated Statement of Income. The dividend income and interest
income on these financial assets are recognized under Interest income in the Consolidated
Statement of Income.
Securities Purchased Under Reverse
Repurchase Agreements, Obligations Related to Securities
Sold
Under Repurchase Agreements, and
Securities Borrowed and Loaned
The Bank recognizes these transactions at amortized
cost using the effective interest rate method, except when they are
designated at fair value through profit or loss and are recorded at
fair value. These transactions are held within a business model
whose objective is to collect contractual cash flows, i.e., cash
flows that are solely payments of principal and interest on the
principal amount outstanding. Securities sold under repurchase
agreements remain on the Consolidated Balance Sheet, whereas
securities purchased under reverse repurchase agreements are not
recognized. Reverse repurchase agreements and repurchase agreements
are treated as collateralized lending and borrowing
transactions.
The Bank also borrows and lends securities. Securities
loaned remain on the Consolidated Balance Sheet, while securities
borrowed are not recognized. As part of these transactions, the
Bank pledges or receives collateral in the form of cash or
securities. Collateral pledged in the form of securities remains on
the Consolidated Balance Sheet. Collateral received in the form of
securities is not recognized in the Consolidated Balance Sheet.
Collateral pledged or received in the form of cash is recognized in
financial assets or liabilities in the Consolidated Balance
Sheet.
When the collateral is pledged or received in the form
of cash, the interest income and expense are recorded in
Net interest income in the
Consolidated Statement of Income.
Loans
Loans Measured at
Amortized Cost
Loans classified as measured at amortized cost
include loans originated or purchased by the Bank that are not
classified as measured at fair value through profit or loss or
designated at fair value through profit or loss. These loans are
held within a business model whose objective is to collect
contractual cash flows, i.e., cash flows that are solely payments
of principal and interest on the principal amount outstanding. All
loans originated by the Bank are recognized when cash is advanced
to a borrower. Purchased loans are recognized when the cash
consideration is paid by the Bank.
All loans are initially recognized at fair value
plus directly attributable costs and are subsequently measured at
amortized cost using the effective interest rate method, net of
allowances for expected credit losses. For purchased performing
loans, the acquisition date fair value adjustment on each loan is
amortized to interest income over the expected remaining life of
the loan using the effective interest rate method. For purchased
credit-impaired loans, the acquisition date fair value adjustment
on each loan consists of management's estimate of the shortfall of
principal and interest cash flows that the Bank expects to collect
and of the time value of money. The time value of money component
of the fair value adjustment is amortized to interest income over
the remaining life of the loan using the effective interest rate
method. Loans are presented net of allowances for credit losses in
the Consolidated Balance Sheet.
Loans Measured at
Fair Value Through Profit or Loss
Loans classified as measured at fair value through
profit or loss, loans designated at fair value through profit or
loss, and loans for which the contractual cash flows are not solely
payments of principal and interest on the principal amount
outstanding are recognized at fair value in the Consolidated
Balance Sheet. The interest income on loans at fair value through
profit or loss is recorded in Interest income in the Consolidated
Statement of Income.
Changes in the fair value of loans classified as at
fair value through profit or loss and loans designated at fair
value through profit or loss are recognized in Non-interest income - Trading revenues
(losses) in the Consolidated Statement of Income. With
respect to loans whose contractual cash flows are not solely
payments of principal and interest on the principal amount
outstanding, changes in fair value are recognized in Non-interest income - Other in
the Consolidated Statement of Income.
Reclassification of Financial
Assets
A financial asset, other than a derivative financial
instrument or a financial asset that, at initial recognition, was
designated as measured at fair value through profit or loss, is
reclassified only in rare situations, i.e., when there is a change
in the business model used to manage the financial asset. The
reclassification is applied prospectively from the reclassification
date.
Establishing
Fair Value
The fair value of a financial instrument is the
price that would be received to sell a financial asset or paid to
transfer a financial liability in an orderly transaction in the
principal market at the measurement date under current market
conditions (i.e., an exit price).
Unadjusted quoted prices in active markets, based on
bid prices for financial assets and offered prices for financial
liabilities, provide the best evidence of fair value. A
financial instrument is considered quoted in an active market when
prices in exchange, dealer, broker or principal-to-principal
markets are accessible at the measurement date. An active
market is one where transactions occur with sufficient frequency
and volume to provide quoted prices on an ongoing basis.
When there is no quoted price in an active market,
the Bank uses another valuation technique that maximizes the use of
relevant observable inputs and minimizes the use of unobservable
inputs. The chosen valuation technique incorporates all the factors
that market participants would consider when pricing a transaction.
Judgment is required when applying a large number of acceptable
valuation techniques and estimates to determine fair value. The
estimated fair value reflects market conditions on the valuation
date and, consequently, may not be indicative of future fair
value.
The best evidence of the fair value of a financial
instrument at initial recognition is the transaction price, i.e.,
the fair value of the consideration received or paid. If there is a
difference between the fair value at initial recognition and the
transaction price, and the fair value is determined using a
valuation technique based on observable market inputs or, in the
case of a derivative, if the risks are fully offset by other
contracts entered into with third parties, this difference is
recognized in the Consolidated Statement of Income. In other cases,
the difference between the fair value at initial recognition and
the transaction price is deferred in the Consolidated Balance
Sheet. The amount of the deferred gain or loss is recognized over
the term of the financial instrument. The unamortized balance is
immediately recognized in net income when (i) observable market
inputs can be obtained and support the fair value of the
transaction, (ii) the risks associated with the initial contract
are substantially offset by other contracts entered into with third
parties, (iii) the gain or loss is realized through a cash receipt
or payment, or (iv) the transaction matures or is terminated before
maturity.
Note 1 - Basis of Presentation and
Summary of Material Accounting Policies (cont.)
In certain cases, measurement adjustments are
recognized to address factors that market participants would use at
the measurement date to determine fair value but that are not
included in the measurement techniques due to system limitations or
uncertainty surrounding the measure. These factors include, but are
not limited to, the unobservable nature of the inputs used in the
valuation model, assumptions about risk such as market risk, credit
risk, or valuation model risk, and future administration costs. The
Bank may also consider market liquidity risk when determining the
fair value of financial instruments when it believes these
instruments could be disposed of for a consideration that is below
the fair value otherwise determined due to a lack of market
liquidity or an insufficient volume of transactions in a given
market. The measurement adjustments also include the funding
valuation adjustment applied to derivative financial instruments to
reflect the market implied cost or benefits of funding collateral
for uncollateralized or partly collateralized
transactions.
As permitted when certain criteria are met, the Bank
has elected to determine fair value based on net exposure to credit
risk or market risk for certain portfolios of financial
instruments, mainly derivative financial instruments.
Impairment of
Financial Assets
At the end of each reporting period, the Bank
applies a three-stage impairment approach to measure the expected
credit losses (ECL) on all debt instruments measured at amortized
cost or at fair value through other comprehensive income and on
loan commitments and financial guarantees that are not measured at
fair value. The ECL model is forward looking. Measurement of ECLs
at each reporting period reflects reasonable and supportable
information about past events, current conditions, and forecasts of
future events and future economic conditions.
Determining the Stage
The ECL three-stage impairment approach is based on
the change in the credit quality of financial assets since initial
recognition. If, at the reporting date, the credit risk of
non-impaired financial instruments has not increased significantly
since initial recognition, these financial instruments are
classified in Stage 1, and an allowance for credit losses that is
measured, at each reporting date, in an amount equal to 12-month
expected credit losses, is recorded. When there is a significant
increase in credit risk since initial recognition, these
non-impaired financial instruments are migrated to Stage 2, and an
allowance for credit losses that is measured, at each reporting
date, in an amount equal to lifetime expected credit losses, is
recorded. In subsequent reporting periods, if the credit risk of a
financial instrument improves such that there is no longer a
significant increase in credit risk since initial recognition, the
ECL model requires reverting to Stage 1, i.e., recognition of
12-month expected credit losses. When one or more events that have
a detrimental impact on the estimated future cash flows of a
financial asset occurs, the financial asset is considered
credit-impaired and is migrated to Stage 3, and an allowance for
credit losses equal to lifetime expected credit losses continues to
be recorded or the financial asset is written off. Interest income
is calculated on the gross carrying amount for financial assets in
Stages 1 and 2 and on the net carrying amount for financial assets
in Stage 3.
Assessment of Significant Increase
in Credit Risk
In determining whether credit risk has increased
significantly, the Bank uses an internal credit risk grading
system, external risk ratings, and forward-looking information to
assess deterioration in the credit quality of a financial
instrument. To assess whether or not the credit risk of a financial
instrument has increased significantly, the Bank compares the
probability of default (PD) occurring over its expected life as at
the reporting date with the PD occurring over its expected life on
the date of initial recognition and considers reasonable and
supportable information indicative of a significant increase in
credit risk since initial recognition. The Bank includes relative
and absolute thresholds in the definition of significant increase
in credit risk and a backstop of 30 days past due. All financial
instruments that are more than 30 days past due since initial
recognition are migrated to Stage 2 even if other metrics do not
indicate that a significant increase in credit risk has occurred.
The assessment of a significant increase in credit risk requires
significant judgment.
Measurement of Expected Credit
Losses
ECLs are measured as the probability-weighted
present value of all expected cash shortfalls over the remaining
expected life of the financial instrument, and reasonable and
supportable information about past events, current conditions, and
forecasts of future events and economic conditions is considered.
The estimation and application of forward-looking information
requires significant judgment. Cash shortfalls represent the
difference between all contractual cash flows owed to the Bank and
all cash flows that the Bank expects to receive.
The measurement of ECLs is primarily based on
the product of the financial instrument's PD, loss given default
(LGD), and exposure at default (EAD). Forward-looking macroeconomic
factors such as unemployment rates, housing price indices, interest
rates, and gross domestic product (GDP) are incorporated into the
risk parameters. The estimate of expected credit losses reflects an
unbiased and probability-weighted amount that is determined by
evaluating a range of possible outcomes. The Bank incorporates
three forward-looking macroeconomic scenarios in its ECL
calculation process: a base scenario, an upside scenario, and a
downside scenario. Probability weights are assigned to each
scenario. The scenarios and probability weights are reassessed
quarterly and subject to management review. The Bank applies
experienced credit judgment to adjust the modelled ECL results when
it becomes evident that known or expected risk factors and
information were not considered in the credit risk rating and
modelling process.
ECLs for all financial instruments are
recognized in Provisions for
credit losses in the Consolidated Statement of Income. In
the case of debt instruments measured at fair value through other
comprehensive income, ECLs are recognized in Provisions for credit losses in the
Consolidated Statement of Income, and a corresponding amount is
recognized in Other comprehensive
income with no reduction in the carrying amount of the
asset in the Consolidated Balance Sheet. As for debt instruments
measured at amortized cost, they are presented net of the related
allowances for credit losses in the Consolidated Balance Sheet.
Allowances for credit losses for off-balance-sheet credit exposures
that are not measured at fair value are included in Other liabilities in the Consolidated
Balance Sheet.
Purchased or Originated
Credit-Impaired Financial Assets
On initial recognition of a financial asset, the
Bank determines whether the asset is credit-impaired. For financial
assets that are credit-impaired upon purchase or origination, the
lifetime expected credit losses are reflected in the initial fair
value. In subsequent reporting periods, the Bank recognizes only
the cumulative changes in these lifetime ECLs since initial
recognition as an allowance for credit losses. The Bank recognizes
changes in ECLs under Provisions
for credit losses
in the Consolidated Statement of Income, even if the lifetime ECLs
are less than the ECLs that were included in the estimated cash
flows on initial recognition.
Definition of Default
The definition of default used by the
Bank to measure ECLs and transfer financial instruments between
stages is consistent with the definition of default used for
internal credit risk management purposes. The Bank considers a
financial asset, other than a credit card receivable, to be
credit-impaired when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset
have occurred or when contractual payments are 90 days past due.
Credit card receivables are considered credit-impaired and are
fully written off at the earlier of the following dates: when a
notice of bankruptcy is received, a settlement proposal is made, or
contractual payments are 180 days past due.
Write-Offs
A financial asset and its related allowance for
credit losses are normally written off in whole or in part when the
Bank considers the probability of recovery to be
non-existent and when all guarantees and other remedies available
to the Bank have been exhausted or if the borrower is bankrupt or
winding up and balances owing are not likely to be recovered.
Derecognition
of Financial Assets and Securitization
A financial asset is considered for derecognition when
the Bank has transferred contractual rights to receive the cash
flows or assumed an obligation to transfer these cash flows to a
third party. The Bank derecognizes a financial asset when it
considers that substantially all the risks and rewards of ownership
of the asset have been transferred or when the contractual rights
to the cash flows of the financial asset expire. When the Bank
considers that it has retained substantially all the risks and
rewards of ownership of the transferred asset, it continues to
recognize the financial asset and, if applicable, recognizes a
financial liability in the Consolidated Balance Sheet. If, due to a
derivative financial instrument, the transfer of a financial asset
does not result in derecognition, the derivative financial
instrument is not recognized in the Consolidated Balance Sheet.
When the Bank has neither transferred nor retained
substantially all the risks and rewards of ownership of the
financial asset, it derecognizes the financial asset it no longer
controls. Any rights and obligations retained following the asset
transfer are recognized separately as an asset or liability. If the
Bank retains control of the financial asset, it continues to
recognize the asset to the extent of its continuing involvement in
that asset, i.e., the extent to which it is exposed to changes in
the value of the transferred asset.
To diversify its funding sources, the Bank
participates in two Canada Mortgage and Housing Corporation (CMHC)
securitization programs: the Mortgage-Backed Securities Program
under the National Housing
Act (Canada) (NHA) and Canada Mortgage Bond (CMB) program.
Under the first program, the Bank issues NHA securities backed by
insured residential mortgages and, under the second, the Bank sells
NHA securities to Canada Housing Trust (CHT). As part of these
transactions, the Bank retains substantially all the risks and
rewards related to ownership of the mortgage loans sold. Therefore,
the insured mortgage loans securitized under the CMB program
continue to be recognized in Loans in the Bank's Consolidated
Balance Sheet, and the liabilities for the considerations received
from the transfer are recognized in Liabilities related to transferred
receivables in the Consolidated Balance Sheet. Moreover,
insured mortgage loans securitized and retained by the Bank
continue to be recognized in Loans in the Consolidated Balance
Sheet.
Derecognition of
Financial Liabilities
A financial liability is derecognized when the
obligation is discharged, cancelled, or expires. The difference
between the carrying value of the financial liability transferred
and the consideration paid is recognized in the Consolidated
Statement of Income.
Cash and Deposits
With Financial Institutions
Cash and deposits with financial institutions
consist of cash and cash equivalents, amounts pledged as collateral
as well as amounts placed in escrow. Cash and cash equivalents
consist of cash, bank notes, deposits with the Bank of Canada and
other financial institutions, including net receivables related to
cheques, and other items in the clearing process.
Note 1 - Basis of Presentation and
Summary of Material Accounting Policies (cont.)
Acceptances and
Customers' Liability Under Acceptances
The potential liability of the Bank under
acceptances is recorded as a customer commitment liability in the
Consolidated Balance Sheet. The Bank's potential recourse vis-à-vis
clients is recorded as an equivalent offsetting asset. Fees are
recorded in Non-interest
income in the Consolidated Statement of Income.
Obligations Related
to Securities Sold Short
This financial liability represents the Bank's
obligation to deliver the securities it sold but did not own at the
time of sale. Obligations related to securities sold short are
recorded at fair value and presented as liabilities in the
Consolidated Balance Sheet. Realized and unrealized gains and
losses are recognized in Non‑interest income in the
Consolidated Statement of Income.
Derivative
Financial Instruments
In the normal course of business, the Bank uses
derivative financial instruments to meet the needs of its clients,
to generate trading activity revenues, and to manage its exposure
to interest rate risk, foreign exchange risk, credit risk, and
other market risks.
All derivative financial instruments are measured at
fair value in the Consolidated Balance Sheet. Derivative financial
instruments with a positive fair value are included in assets,
whereas derivative financial instruments with a negative fair value
are included in liabilities in the Consolidated Balance Sheet.
Where there are offsetting financial assets and financial
liabilities, the net fair value of certain derivative financial
instruments is reported either as an asset or as a liability,
depending on the circumstance.
Embedded Derivative Financial
Instruments
An embedded derivative is a component of a hybrid
contract that also includes a non-derivative host, the effect being
that some of the cash flows of the combined instrument vary in a
way similar to a stand-alone derivative. An embedded derivative
causes some or all of the cash flows that otherwise would be
required by the contract to be modified according to a specified
interest rate, financial instrument price, commodity price, foreign
exchange rate, index of prices or rates, credit rating or credit
index, or other variable, provided, in the case of a non-financial
variable, that the variable is not specific to one of the parties
to the contract.
A derivative embedded in a financial liability is
separated from the host contract and treated as a separate
derivative if, and only if, the following three conditions are met:
the economic characteristics and risks of the embedded derivative
are not closely related to those of the host contract, the embedded
derivative is a separate instrument that meets the definition of a
derivative financial instrument, and the hybrid contract is not
measured at fair value through profit or loss. Embedded
derivatives that are separately accounted for are measured at fair
value in the Consolidated Balance Sheet, and subsequent changes in
fair value are recognized in Non-interest income in the Consolidated Statement
of Income.
All embedded derivatives are presented on a
combined basis with the host contract.
Held-for-Trading Derivative
Financial Instruments
Derivative financial instruments are recognized at
fair value, and the realized and unrealized gains and losses
(including interest income and expense) are recorded in
Non-interest income in the
Consolidated Statement of Income.
Derivative Financial Instruments
Designated as Hedging Instruments
Policy
The purpose of a hedging transaction is to modify
the Bank's exposure to one or more risks by creating an offset
between changes in the fair value of, or the cash flows
attributable to, the hedged item and the hedging instrument. Hedge
accounting ensures that offsetting gains, losses, revenues and
expenses are recognized in the Consolidated Statement of Income in
the same period or periods.
Documenting and
Assessing Effectiveness
The Bank designates and formally documents each
hedging relationship, at its inception, by detailing the risk
management objective and the hedging strategy. The documentation
identifies the specific asset, liability, or cash flows being
hedged, the related hedging instrument, the nature of the specific
risk exposure or exposures being hedged, the intended term of the
hedging relationship, and the method for assessing the
effectiveness or ineffectiveness of the hedging relationship. At
the inception of the hedging relationship, and for every financial
reporting period for which the hedge has been designated, the Bank
ensures that the hedging relationship is highly effective and
consistent with its originally documented risk management objective
and strategy. When a hedging relationship meets the hedge
accounting requirements, it is designated as either a fair value
hedge, a cash flow hedge or a foreign exchange hedge of a net
investment in a foreign operation.
Interest Rate
Benchmark Reform
A hedging relationship is directly affected by
interest rate benchmark reform such as interbank offered rates
(IBORs) only if the reform gives rise to uncertainties about (a)
the interest rate benchmark (contractually or non-contractually
specified) designated as a hedged risk; and/or (b) the timing or
the amount of the interest-rate-benchmark-based cash flows of the
hedged item or of the hedging instrument.
For such hedging relationships, the following
temporary exceptions apply during the period of uncertainty:
• when determining whether a
forecast transaction is highly probable or expected to occur, it is
assumed that the interest rate benchmark on which the hedged cash
flows (contractually or non-contractually specified) are based is
not altered as a result of interest rate benchmark reform;
• when assessing whether a
hedge is expected to be highly effective, it is assumed that the
interest rate benchmark on which the hedged cash flows and/or the
hedged risk (contractually or non-contractually specified) are
based, or the interest rate benchmark on which the cash flows of
the hedging instrument are based, is not altered as a result of
interest rate benchmark reform;
• a hedge is not required to
be discontinued if the actual results of the hedge are outside an
effectiveness range of 80% to 125% as a result of interest rate
benchmark reform;
• for a hedge of a
non-contractually specified benchmark portion of interest rate
risk, the requirement that the designated portion be separately
identifiable need only be met at the inception of the hedging
relationship.
Fair Value
Hedges
For fair value hedges, the Bank mainly uses interest
rate swaps to hedge changes in the fair value of a hedged item. The
carrying amount of the hedged item is adjusted based on the
effective portion of the gains or losses attributable to the hedged
risk, which are recognized in the Consolidated Statement of Income,
as well as the change in the fair value of the hedging instrument.
The resulting ineffective portion is recognized in Non-interest income in the
Consolidated Statement of Income.
The Bank prospectively discontinues hedge accounting
if the hedging instrument is sold or expires or if the hedging
relationship no longer qualifies for hedge accounting or if the
Bank revokes the designation. When the designation is revoked, the
hedged item is no longer adjusted to reflect changes in fair value,
and the amounts previously recorded as cumulative adjustments with
respect to the effective portion of gains and losses attributable
to the hedged risk are amortized using the effective interest rate
method and recognized in the Consolidated Statement of Income over
the remaining useful life of the hedged item. If the hedged item is
sold or terminated before maturity, the cumulative adjustments with
respect to the effective portion of gains and losses attributable
to the hedged risk are immediately recorded in the Consolidated
Statement of Income.
Cash Flow
Hedges
For cash flow hedges, the Bank mainly uses interest
rate swaps and total return swaps to hedge variable cash flows
attributable to the hedged risk related to a financial asset or
liability (or to a group of financial assets or financial
liabilities). The effective portion of changes in fair value of the
hedging instrument is recognized in Other comprehensive income, whereas
the ineffective portion is recognized in Non-interest income in the
Consolidated Statement of Income.
The amounts previously recorded in Accumulated other comprehensive income
are reclassified to the Consolidated Statement of Income of the
period or periods during which the cash flows of the hedged item
affect the Consolidated Statement of Income. If the hedging
instrument is sold or expires or if the hedging relationship no
longer qualifies for hedge accounting or if the Bank cancels that
designation, then the amounts previously recognized in Accumulated other comprehensive income
are reclassified to the Consolidated Statement of Income in the
period or periods during which the cash flows of the hedged item
affect the Consolidated Statement of Income.
Hedges of Net
Investments in Foreign Operations
Derivative and non-derivative financial instruments
are used to hedge foreign exchange risk related to investments made
in foreign operations whose functional currency is not the Canadian
dollar. The effective portion of the gains and losses on the
hedging instrument is recognized in Other comprehensive income, whereas
the ineffective portion is recognized in Non-interest income in the
Consolidated Statement of Income. Upon the total or partial sale of
a net investment in a foreign operation, amounts reported under
Accumulated other comprehensive
income are reclassified, in whole or in part, to
Non-interest income in the
Consolidated Statement of Income.
Offsetting of
Financial Assets and Liabilities
Financial assets and liabilities are offset, and the
net amount is presented in the Consolidated Balance Sheet when the
Bank has a legally enforceable right to set off the recognized
amounts and intends to settle on a net basis or to realize the
asset and settle the liability simultaneously.
Note 1 - Basis of Presentation and
Summary of Material Accounting Policies (cont.)
Premises and
Equipment
Premises and equipment, except for land and the
portion under construction of the head office building, are
recognized at cost less accumulated depreciation and accumulated
impairment losses, if any. Land and the portion under construction
of the head office building are recorded at cost less any
accumulated impairment losses. Right-of-use assets are presented in
Premises and equipment in
the Consolidated Balance Sheet. For additional information about
the accounting treatment of right-of-use assets, see the Leases
section presented below.
Buildings, computer equipment, and equipment and
furniture are systematically depreciated over their estimated
useful lives. The depreciation period for leasehold improvements is
the lesser of the estimated useful life of the leasehold
improvements or the non-cancellable period of the lease.
Depreciation methods and estimated useful lives are reviewed
annually. The depreciation expense is recorded in Non-interest expenses in the
Consolidated Statement of Income.
|
|
|
|
Method
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Useful
life
|
|
|
Significant components of the head
office building
|
|
|
|
|
|
|
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Interior design
|
|
Straight-line
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10-20
years
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|
|
|
Exterior design, roofing and
electromechanical system
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|
Straight-line
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30
years
|
|
|
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Structure
|
|
Straight-line
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75
years
|
|
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Other buildings
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5%
declining balance
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|
|
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Computer equipment
|
|
Straight-line
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3-7
years
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|
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Equipment and furniture
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|
Straight-line
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|
8
years
|
|
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Leasehold improvements
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Straight-line
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(1)
|
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(1)
The depreciation period is the lesser of the
estimated useful life or the lease term.
Leases
At the inception date of a contract, the Bank assesses
whether the contract is, or contains, a lease. A contract is, or
contains, a lease if it conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. When the Bank is a lessee, it recognizes a
right-of-use asset and a corresponding lease liability at the lease
commencement date except for short-term leases (defined as leases
with terms of 12 months or less) other than real estate leases and
leases for which the underlying asset is of low value. For such
leases, the Bank recognizes the lease payments under Non-interest expenses in the
Consolidated Statement of Income on a straight-line basis over the
lease term. As a practical expedient, the Bank elected, for real
estate leases, not to separate non-lease components from lease
components and instead account for them as a single lease
component. When the Bank is the lessor, the leased assets remain in
the Consolidated Balance Sheet and are reported under Premises and equipment, and the rental
income is recognized net of related expenses under Non-interest income in the
Consolidated Statement of Income.
Right-of-use assets are initially measured at cost and
subsequently measured at cost less accumulated depreciation and
accumulated impairment losses, if any, and adjusted for certain
remeasurements of lease liabilities. The cost of a right-of-use
asset comprises the amount of the initial measurement of the lease
liability, any lease payments made at or before the commencement
date, any initial direct costs incurred when entering into the
lease, and an estimate of costs to dismantle the asset or restore
the site, less any lease incentives received. Right-of-use assets
are depreciated on a straight-line basis over the lesser of the
lease term and the estimated useful life of the asset. Right-of-use
assets are presented in Premises
and equipment in the Consolidated Balance Sheet. The
depreciation expense and impairment losses, if any, are recorded in
Non-interest expenses in
the Consolidated Statement of Income.
The lease liability is initially measured at the
present value of future lease payments net of lease incentives not
yet received. The present value of lease payments is determined
using the Bank's incremental borrowing rate. The lease liability is
subsequently measured at amortized cost using the effective
interest method. In determining the lease term, the Bank considers
all the facts and circumstances that create an economic incentive
to exercise an extension option or not to exercise a termination
option. The lease term determined by the Bank comprises the
non-cancellable period of lease contracts, the periods covered by
an option to extend the lease if the Bank is reasonably certain to
exercise that option, and the periods covered by an option to
terminate the lease if the Bank is reasonably certain not to
exercise that option. The Bank reassesses the lease term if a
significant event or change in circumstances occurs and that is
within its control. The Bank applies judgment to determine the
lease term when the lease contains extension and termination
options. Lease liabilities are presented under Other liabilities in the Consolidated
Balance Sheet, and the interest expense is presented in
Interest expense - Other
in the Consolidated Statement of Income.
Goodwill
The Bank uses the acquisition method to account for
business combinations. The consideration transferred in a business
combination is measured at the acquisition-date fair value, and the
transaction costs related to the acquisition are expensed as
incurred. When the Bank acquires control of a business, all of the
identifiable assets and liabilities of the acquiree, including
intangible assets, are recorded at fair value. The interests
previously held in the acquiree are also measured at fair value.
Goodwill represents the excess of the purchase consideration and
all previously held interests over the fair value of the
identifiable net assets of the acquiree. If the fair value of the
identifiable net assets exceeds the purchase consideration and all
previously held interests, the difference is immediately recognized
in income as a gain on a bargain purchase.
Non-controlling interests in the net assets of
consolidated subsidiaries are identified separately from the Bank's
ownership interest and can be initially measured at either fair
value or at the non-controlling interest's proportionate share of
the acquiree's identifiable net assets. The measurement basis is
selected on a case-by-case basis. Following an acquisition,
non-controlling interests consist of the value assigned to those
interests at initial recognition plus the non-controlling
interests' share of changes in equity since the date of the
acquisition.
Intangible
Assets
Intangible Assets With Finite
Useful Lives
Software that is not part of a cloud computing
arrangement and certain other intangible assets are recognized at
cost less accumulated amortization and accumulated impairment
losses. These intangible assets are systematically amortized on a
straight-line basis over their useful lives, which vary between
four and ten years. The amortization expense is recorded in
Non-interest expenses in
the Consolidated Statement of Income.
Intangible Assets With Indefinite
Useful Lives
The Bank's intangible assets with indefinite useful
lives come from the acquisition of subsidiaries or groups of assets
and consist of management contracts and a trademark. They are
recognized at the acquisition-date fair value. The management
contracts are for the management of open-ended funds. At the end of
each reporting period, the Bank reviews the useful lives to
determine whether facts and circumstances continue to support an
indefinite useful life assessment. Intangible assets are
deemed to have an indefinite useful life following an examination
of all relevant factors, in particular: (a) the contracts do
not have contractual maturities; (b) the stability of the
business segment to which the intangible assets belong; (c) the
Bank's capacity to control the future economic benefits of the
intangible assets; and (d) the continued economic benefits
generated by the intangible assets.
Impairment of
Non-Financial Assets
Premises and equipment and intangible assets with
finite useful lives are tested for impairment when events or
changes in circumstances indicate that their carrying value may not
be recoverable. At the end of each reporting period, the Bank
determines whether there is an indication that premises and
equipment or intangible assets with finite useful lives may be
impaired. Goodwill and intangible assets that are not available for
use or that have indefinite useful lives are tested for impairment
annually or more frequently if there is an indication that the
asset might be impaired.
An asset is tested for impairment by comparing its
carrying amount with its recoverable amount. The recoverable amount
must be estimated for the individual asset. Where it is not
possible to estimate the recoverable amount of an individual asset,
the recoverable amount of the cash-generating unit (CGU) to which
the asset belongs will be determined. A CGU is the smallest
identifiable group of assets that generates cash inflows that are
largely independent of the cash inflows from other assets or groups
of assets. The Bank uses judgment to identify CGUs.
An asset's recoverable amount is the higher of
fair value less costs to sell and the value in use of the asset or
CGU. Value in use is the present value of expected future cash
flows from the asset or CGU. The recoverable amount of the
asset or CGU is determined using valuation models that consider
various factors such as projected future cash flows, discount
rates, and growth rates. The use of different estimates and
assumptions in applying the impairment tests could have a
significant impact on income.
Corporate assets, such as the head office building and
computer equipment, do not generate cash inflows that are largely
independent of the cash inflows generated by other assets or groups
of assets. Therefore, the recoverable amount of an individual
corporate asset cannot be determined unless management has decided
to dispose of the asset. However, if there is an indication that a
corporate asset may be impaired, the recoverable amount is
determined for the CGU or group of CGUs to which the corporate
asset belongs, and that recoverable amount is compared with the
carrying amount of this CGU or group of CGUs.
Note 1 - Basis of Presentation and
Summary of Material Accounting Policies (cont.)
Goodwill is always tested for impairment at the level
of a CGU or group of CGUs. For impairment testing purposes, from
the acquisition date, goodwill resulting from a business
combination must be allocated to the CGU or group of CGUs expected
to benefit from the synergies of the business combination. Each CGU
or group of CGUs to which goodwill is allocated must represent the
lowest level for which the goodwill is monitored internally at the
Bank and must not be larger than an operating segment. The
allocation of goodwill to a CGU or group of CGUs involves
management's judgment. If an impairment loss is to be recognized,
the Bank does so by first reducing the carrying amount of goodwill
allocated to the CGU or group of CGUs and then reducing the
carrying amounts of the other assets of the CGU or group of CGUs in
proportion to the carrying amount of each asset in the CGU or group
of CGUs.
If the recoverable amount of an asset or a CGU is
less than its carrying amount, the carrying amount is reduced to
its recoverable amount and an impairment loss is recognized in
Non-interest expenses in
the Consolidated Statement of Income. An impairment loss recognized
in prior periods for an asset other than goodwill must be reversed
if, and only if, there has been a change in the estimates used to
determine the asset's recoverable amount since the last impairment
was recognized. If this is the case, the carrying amount of the
asset is increased, given that the impairment loss was reversed,
but shall not exceed the carrying amount that would have been
determined, net of amortization, had no impairment loss been
recognized for this asset in previous years.
Provisions
Provisions are liabilities of uncertain timing and
amount. A provision is recognized when the Bank has a present
obligation (legal or constructive) arising from a past event, when
it is probable that an outflow of economic resources will be
required to settle the obligation and when the amount of the
obligation can be reliably estimated. Provisions are based on the
Bank's best estimates of the economic resources required to settle
the present obligation, given all relevant risks and uncertainties,
and, when it is significant, the effect of the time value of money.
Provisions are reviewed at the end of each reporting period.
Provisions are presented in Other
liabilities in the Consolidated Balance Sheet.
Interest Income and
Expense
Interest income and expense, except for the interest
income on securities classified as at fair value through profit or
loss, are recognized in Net
interest income and calculated using the effective interest
rate method.
The effective interest rate is the rate that exactly
discounts estimated future cash inflows and outflows through the
expected life of a financial asset or financial liability to the
gross carrying amount of a financial asset or to the amortized cost
of a financial liability. When calculating the effective interest
rate, the Bank estimates expected cash flows by considering all the
contractual terms of the financial instrument but does not consider
expected credit losses. The calculation includes all fees and
points paid or received between the parties to the contract that
are an integral part of the effective interest rate, transaction
costs, and all other premiums or discounts. Interest income is
calculated by applying the effective interest rate to the gross
carrying amount of a financial asset except for purchased or
originated credit-impaired financial assets and financial assets
that were not impaired upon their purchase or origination but
became impaired thereafter. For purchased or originated
credit-impaired financial assets, the Bank applies the
credit-adjusted effective interest rate to the amortized cost of
the financial asset from initial recognition. The credit-adjusted
effective interest rate reflects expected credit losses. As for
loans that have subsequently become credit-impaired, interest
income is calculated by applying the effective interest rate to the
net carrying amount (net of allowances for credit losses) rather
than to the gross carrying amount.
Loan origination fees, including commitment,
restructuring, and renegotiation fees, are considered an integral
part of the yield earned on the loan. They are deferred and
amortized using the effective interest rate method, and the
amortization is recognized in Interest income over the term of the
loan. Direct costs for originating a loan are netted against the
loan origination fees. If it is likely that a commitment will
result in a loan, commitment fees receive the same accounting
treatment, i.e., they are deferred and amortized using the
effective interest rate method and the amortization is recognized
in Interest income over
the term of the loan. Otherwise, they are recorded in Non-interest income over the term of
the commitment.
Loan syndication fees are recorded in Non-interest income unless the yield
on the loan retained by the Bank is less than that of other
comparable lenders involved in the financing. In such cases, an
appropriate portion of the fees is deferred and amortized using the
effective interest rate method, and the amortization is recognized
in Interest income over
the term of the loan. Certain mortgage loan prepayment fees are
recognized in Interest
income in the Consolidated Statement of Income when
earned.
Dividend
Income
Dividends from an equity instrument are recognized
under Net interest income
in the Consolidated Statement of Income when the Bank's right to
receive payment is established.
Fee and Commission
Income
Fee and commission income is recognized when, or as, a
performance obligation is satisfied, i.e., when control of a
promised service is transferred to a customer and in an amount that
reflects the consideration that the entity expects to be entitled
to receive in exchange for the service. The revenue may therefore
be recognized at a point in time, upon completion of the service,
or over time as services are provided.
The Bank must also determine whether its performance
obligation is to provide the service itself or to arrange for
another party to provide the service (in other words, whether the
Bank is acting as a principal or agent). A principal may itself
satisfy its performance obligation to provide the specified good or
service or it may engage another party to satisfy some or all of
the performance obligation on its behalf. A principal also has the
primary responsibility for fulfilling the promise to provide the
good or service to the customer and has discretion in establishing
the price for the service. If the Bank is acting as a principal,
revenue is recognized on a gross basis in an amount corresponding
to the consideration to which the Bank expects to be entitled. If
the Bank is acting as an agent, then revenue is recognized net of
the service fees and other costs incurred in relation to the
commission and fees earned.
Underwriting and Advisory
Fees
Underwriting and advisory fees include underwriting
fees, financial advisory fees, and loan syndication fees. These
fees are mainly earned in the Financial Markets segment and are
recognized at a point in time as revenue upon successful completion
of the engagement. Financial advisory fees are fees earned for
assisting customers with transactions related to mergers and
acquisitions and financial restructurings. Loan syndication fees
represent fees earned as the agent or lead lender responsible for
structuring, arranging, and administering a loan syndication and
are recorded in Non-interest
income unless the yield on the loan retained by the Bank is
less than that of other comparable lenders involved in the
financing. In such cases, an appropriate portion of the fees is
deferred and amortized using the effective interest rate method,
and the amortization is recognized in Interest income over the term of the
loan.
Securities Brokerage
Commissions
Securities brokerage commissions are earned in the
Wealth Management segment and are recognized when the transaction
is executed.
Mutual Fund Revenues
Mutual fund revenues include management fees earned in
the Wealth Management segment. Management fees are primarily
calculated based on a fund's net asset value and are recorded in
the period the services are performed.
Investment Management and Trust
Service Fees
Investment management and trust service fees
include management fees, trust service fees, and fees for other
investment services provided to clients and earned in the Wealth
Management segment. Generally, these fees are calculated using the
balances of assets under administration and assets under
management. Such fees are recognized in the period the service is
performed.
Card Revenues
Card revenues are earned in the Personal and
Commercial segment and include card fees such as annual and
transactional fees as well as interchange fees. Interchange fees
are recognized when a card transaction is settled. Card fees are
recognized on the transaction date except for annual fees, which
are recorded evenly throughout the year. Reward costs are recorded
as a reduction to interchange fees.
Credit Fees and Deposit and
Payment Service Charges
Credit fees and deposit and payment service charges
are earned in the Personal and Commercial, Financial Markets, and
U.S. Specialty Finance and International segments. Credit fees
include commissions earned by providing services for loan
commitments, financial guarantee contracts, bankers' acceptances,
and letters of credit and guarantee, and they are generally
recognized in income over the period the services are provided.
Deposit and payment service charges include fees related to account
maintenance activities and transaction-based service charges. Fees
related to account maintenance activities are recognized in the
period the services are provided, whereas transaction-based service
charges are recognized when the transaction is executed.
Insurance
Revenues
Insurance contracts, including reinsurance
contracts, are arrangements under which one party accepts
significant insurance risk by agreeing to compensate the
policyholder if a specified uncertain future event that adversely
affect the policyholder was to occur.
The Bank uses the General Measurement Model (GMM) to
measure most of its insurance and reinsurance contracts based on
the present value of estimates of the expected future cash flows
necessary to fulfill the contracts, including an adjustment for
non-financial risk as well as the contractual service margin (CSM),
which represents the unearned profits that will be recognized as
services are provided in the future. The Bank chose to apply the
simplified approach (the Premium Allocation Approach or PAA) to
measure insurance contracts with coverage periods of one year or
less. The insurance revenues from these contracts are recognized
systematically over the coverage period. For all measurement
approaches, if contracts are expected to be onerous, losses are
recognized immediately in the Consolidated Statement of Income.
Note 1 - Basis of Presentation and
Summary of Material Accounting Policies (cont.)
Upon the issuance of a contract, an insurance
contract asset or liability and a reinsurance contract asset, if
applicable, are recognized under Other assets and under Other liabilities in the Consolidated
Balance Sheet. Subsequent changes in the carrying values of the
insurance contract asset and liability and reinsurance contract
asset are recognized on a net basis under Non-interest income in the
Consolidated Statement of Income.
Insurance service expenses consist mainly of
incurred claims and other insurance service expenses, amortization
of insurance acquisition cash flows, and losses on onerous
contracts as well as reversals of such losses. Royalties received
from reinsurers are recognized in the Consolidated Statement of
Income as the Bank receives services under groups of reinsurance
contracts. Amounts recovered from reinsurers comprise cash flows
related to the claims or benefit experience of the underlying
contracts. All of these amounts are recognized as a deduction from
insurance revenues under Non-interest income in the
Consolidated Statement of Income.
Income
Taxes
Income taxes include current taxes and deferred
taxes and are recorded in net income except for income taxes
generated by items recognized in Other comprehensive income or directly
in equity.
Current tax is the amount of income tax payable on
the taxable income for a period. It is calculated using the enacted
or substantively enacted tax rates prevailing on the reporting
date, and any adjustments recognized in the period for the current
tax of prior periods. Current tax assets and liabilities are
offset, and the net balance is presented under either Other assets or Other liabilities in the Consolidated
Balance Sheet when the Bank has a legally enforceable right to set
off the recognized amounts and intends to settle on a net basis or
to simultaneously realize the asset and settle the liability.
Deferred tax is established based on temporary
differences between the carrying values and the tax bases of assets
and liabilities, in accordance with enacted or substantively
enacted income tax laws and rates that will apply on the date the
differences reverse. Deferred tax is not recognized for temporary
differences related to the following:
·
the initial accounting of goodwill;
·
the initial accounting of an asset or liability
in a transaction that is not a business combination and that, at
the time of the transaction, affects neither accounting income nor
taxable income;
·
investments in subsidiaries, associates and joint
ventures when it is probable that the temporary difference will not
reverse in the foreseeable future and that the Bank controls the
timing of the reversal of the temporary difference;
·
investments in subsidiaries, associates and joint
ventures when it is probable that the temporary difference will not
reverse in the foreseeable future and that there will not be
taxable income to which the temporary difference can be
recognized.
Deferred tax assets are tax benefits in the form of
deductions that the Bank may claim to reduce its taxable income in
future years. At the end of each reporting period, the carrying
amount of deferred tax assets is revised, and it is reduced to the
extent that it is no longer probable that sufficient taxable income
will be available to allow the benefit of the deferred tax asset to
be utilized.
Deferred tax assets and liabilities are offset, and
the net balance is presented under either Other assets or Other liabilities in the Consolidated
Balance Sheet when the Bank has a legally enforceable right to set
off the current tax assets and liabilities and if the deferred tax
assets and liabilities relate to taxes levied by the same taxation
authority on the same taxable entity or on different taxable
entities that intend to settle current tax assets and liabilities
based on their net amount.
The Bank makes assumptions to estimate income taxes
as well as deferred tax assets and liabilities. This process
involves estimating the actual amount of current taxes and
evaluating tax loss carryforwards and temporary differences arising
from differences between the values of items reported for
accounting and for income tax purposes. Deferred tax assets and
liabilities presented in the Consolidated Balance Sheet are
calculated according to the tax rates to be applied in future
periods. Previously recorded deferred tax assets and liabilities
must be adjusted when the date of the future event is revised based
on current information.
The Bank is subject to the jurisdictions of various
tax authorities. In the normal course of its business, the Bank is
involved in a number of transactions for which the tax impacts are
uncertain. As a result, the Bank accounts for provisions for
uncertain tax positions that adequately represent the tax risk
stemming from tax matters under discussion or being audited by tax
authorities or from other matters involving uncertainty. The
amounts of these provisions reflect the best possible estimates of
the amounts that may have to be paid based on qualitative
assessments of all relevant factors. The provisions are estimated
at the end of each reporting period. However, it is possible that,
at a future date, a provision might need to be adjusted following
an audit by the tax authorities. When the final assessment differs
from the initially provisioned amounts, the difference will impact
the income taxes of the period in which the assessment was
made.
Financial Guarantee
Contracts
A financial guarantee contract is a contract or
indemnification agreement that could require the Bank to make
specified payments (in cash, financial instruments, other assets,
Bank shares, or provisions of services) to reimburse a beneficiary
in the event of a loss resulting from a debtor defaulting on the
original or amended terms of a debt instrument.
To reflect the fair value of an obligation assumed
at the inception of a financial guarantee, a liability is recorded
in Other liabilities in
the Consolidated Balance Sheet. After initial recognition, the Bank
must measure financial guarantee contracts at the higher of the
allowance for credit losses, determined using the ECL model, and of
the initially recognized amount less, where applicable, the
cumulative amount of revenue recognized. This revenue is recognized
in Credit fees in the
Consolidated Statement of Income.
Employee Benefits -
Pension Plans and Other Post-Employment Benefit Plans
The Bank offers pension plans that have a defined
benefit component and a defined contribution component. The Bank
also offers other post-employment benefit plans to eligible
retirees. The other post-employment benefit plans include
post-employment medical, dental, and life insurance coverage. The
defined benefit component of the pension plans is funded, whereas
the defined contribution component of the pension plans and of the
other post-employment benefit plans are not funded.
Defined Benefit Component of the
Pension Plans and Other Post-Employment Benefit Plans
Plan expenses and obligations are actuarially
determined based on the projected benefit method prorated on
service. The calculations incorporate management's best estimates
of various actuarial assumptions such as discount rates, rates of
compensation increase, health care cost trend rates, mortality
rates, and retirement age.
The net asset or net liability related to these plans
is calculated separately for each plan as the difference between
the present value of the future benefits earned by employees for
current and prior-period service and the fair value of plan assets.
The net asset or net liability is included under either
Other assets or
Other liabilities in the
Consolidated Balance Sheet.
The expense related to these plans consists of the
following items: current service cost, net interest on the net plan
asset or liability, administration costs, and past service cost, if
any, recognized when a plan is amended. This expense is recognized
in Compensation and employee
benefits in the Consolidated Statement of Income. The net
amount of interest income and expense is determined by applying a
discount rate to the net plan asset or liability amount.
Remeasurements of defined benefit pension plans and
other post-employment benefit plans represent actuarial gains and
losses related to the defined benefit obligation and the actual
return on plan assets, excluding net interest determined by
applying a discount rate to the net plan asset or liability amount.
Remeasurements are immediately recognized in Other comprehensive income and are not
subsequently reclassified to net income; these cumulative gains and
losses are reclassified to Retained earnings.
Defined Contribution Component of
the Pension Plans
The expense for these plans is equivalent to the
Bank's contributions during the period and is recognized in
Compensation and employee
benefits in the Consolidated Statement of Income.
Share-Based
Payments
The Bank has several share-based compensation plans:
the Stock Option Plan, the Stock Appreciation Rights (SAR) Plan,
the Deferred Stock Unit (DSU) Plan, the Restricted Stock Unit (RSU)
Plan, the Performance Stock Unit (PSU) Plan, the Deferred
Compensation Plan (DCP) of National Bank Financial, and the
Employee Share Ownership Plan.
Compensation expense is recognized over the
service period required for employees to become fully entitled to
the award. This period is generally the same as the vesting period,
except where the required service period begins before the award
date. Compensation expense related to awards granted to employees
eligible to retire on the award date is immediately recognized on
the award date. Compensation expense related to awards granted to
employees who will become eligible to retire during the vesting
period is recognized over the period from the award date to the
date the employee becomes eligible to retire. For all of these
plans, as of the first year of recognition, the expense includes
cancellation and forfeiture estimates. These estimates are
subsequently revised, as necessary. The Bank uses derivative
financial instruments to hedge the risks associated with some of
these plans. The compensation expense for these plans, net of
related hedges, is recognized in the Consolidated Statement of
Income.
Under the Stock Option Plan, the Bank uses the fair
value method to account for stock options awarded. The options vest
at 25% per year, and each tranche is treated as though it was a
separate award. The fair value of each of the tranches is measured
on the award date using the Black-Scholes model, and this fair
value is recognized in Compensation and employee benefits and
Contributed surplus. When
the options are exercised, the Contributed surplus amount is credited
to Equity - Common shares
in the Consolidated Balance Sheet. The proceeds received from the
employees when these options are exercised are also credited to
Equity - Common shares in
the Consolidated Balance Sheet.
Note 1 - Basis of Presentation and
Summary of Material Accounting Policies (cont.)
SARs are recorded at fair value when awarded, and
their fair value is remeasured at the end of each reporting period
until they are exercised. The cost is recognized in Compensation and employee benefits in
the Consolidated Statement of Income and under Other liabilities in the Consolidated
Balance Sheet. The obligation that results from the change in fair
value at each period is recognized in net income gradually over the
vesting period, and periodically thereafter, until the SARs are
exercised. When a SAR is exercised, the Bank makes a cash
payment equal to the increase in the stock price since the date of
the award.
The obligation that results from the award of a DSU,
RSU, PSU and DCP unit is recognized in net income, and the
corresponding amount is included in Other liabilities in the Consolidated
Balance Sheet. For the DSU, RSU and DCP plans, the change in the
obligation attributable to changes in the share price and dividends
paid on the common shares of these plans is recognized in
Compensation and employee
benefits in the Consolidated Statement of Income for the
period in which the changes occur. On the redemption date, the Bank
makes a cash payment equal to the value of the common shares on
that date. For the PSU Plan, the change in the obligation
attributable to changes in the share price, adjusted upward or
downward depending on the relative result of the performance
criteria, and the change in the obligation attributable to
dividends paid on the shares awarded under the plan, are recognized
in Compensation and employee
benefits in the Consolidated Statement of Income for the
period in which the changes occur. On the redemption date, the Bank
makes a cash payment equal to the value of the common shares on
that date, adjusted upward or downward according to the performance
criteria.
The Bank's contributions to the employee share
ownership plan are expensed as incurred.
Note 2 - Accounting Policy Changes
On November 1, 2023, the
Bank adopted IFRS 17 - Insurance Contracts (IFRS
17).
Impacts of IFRS 17
Adoption
The IFRS 17 requirements have been applied
retrospectively by adjusting the Consolidated Balance Sheet
balances on the date of initial application, i.e., November 1,
2022. The impacts of IFRS 17 adoption have been recognized
through an adjustment to Retained
earnings as at November 1, 2022. The following
information presents the impacts on the Consolidated Balance Sheets
as at November 1, 2022 and as at
October 31, 2023:
Consolidated Balance Sheets
|
|
|
|
As
at
October
31, 2023
|
|
|
|
As
at
October
31, 2023
|
|
As
at
October
31, 2022
|
|
|
|
As
at
November
1, 2022
|
|
|
|
|
As
reported
|
|
IFRS
17
adjustments
|
|
Adjusted
|
|
As
reported
|
|
IFRS
17
adjustments
|
|
Adjusted
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
7,889
|
|
(101)
|
|
7,788
|
|
5,958
|
|
(50)
|
|
5,908
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
7,423
|
|
(7)
|
|
7,416
|
|
6,361
|
|
(2)
|
|
6,359
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
16,744
|
|
(94)
|
|
16,650
|
|
15,140
|
|
(48)
|
|
15,092
|
|
As at October 31, 2023, the net CSM amount related to
the new recognition and measurement principles for insurance and
reinsurance assets and liabilities had stood at $109 million ($89
million as at November 1, 2022).
The following information presents the impacts on the
Consolidated Statement of Income for the comparative fiscal
year:
Consolidated Statement of Income -
Increase (Decrease)
|
Year
ended October 31, 2023
|
|
|
Non-interest income
- Insurance revenues,
net
|
|
(112)
|
|
|
Total revenues
|
|
(112)
|
|
|
Compensation and employee
benefits
|
|
(27)
|
|
|
Occupancy
|
|
(3)
|
|
|
Technology
|
|
(7)
|
|
|
Professional fees
|
|
(1)
|
|
|
Other
|
|
(10)
|
|
|
Non-interest expenses
|
|
(48)
|
|
|
Income before provisions for credit losses and income
taxes
|
|
(64)
|
|
|
Income before income taxes
|
|
(64)
|
|
|
Income taxes
|
|
(18)
|
|
|
Net
income
|
|
(46)
|
|
Note 3 - Future Accounting Policy Changes
The Bank closely monitors both new accounting
standards and amendments to existing accounting standards issued by
the IASB. The following standards have been issued but are not yet
effective. The Bank is currently assessing the impact of applying
these standards on the Consolidated Financial Statements.
Effective Date - November 1, 2026
Amendments to the Classification and Measurement of Financial
Instruments
In May 2024, the IASB issued
Amendments to the Classification
and Measurement of Financial Instruments, which affects
certain provisions of IFRS 9 - Financial Instruments and IFRS 7 -
Financial Instruments:
Disclosures. Specifically, the amendments apply to the
derecognition of financial liabilities settled through electronic
transfer, to the classification of certain financial assets, to
disclosures regarding equity instruments designated at fair value
through other comprehensive income, and to contractual terms that
could change the timing or amount of contractual cash flows. These
amendments must be applied retrospectively for annual periods
beginning on or after January 1, 2026. Earlier application is
permitted.
Effective Date - November 1, 2027
IFRS 18 - Presentation and Disclosure in Financial
Statements
In April 2024, the IASB issued a new
accounting standard, IFRS 18 - Presentation and Disclosure in Financial
Statements (IFRS 18). This new standard replaces the current
IAS 1 accounting standard on presentation of financial statements.
IFRS 18 presents a new accounting framework that will improve how
information is communicated in financial statements, in particular
performance-related information in the Consolidated Statement of
Income, and that will introduce limited changes to the Consolidated
Statement of Cash Flows and the Consolidated Balance Sheet. IFRS 18
must be applied retrospectively for annual periods beginning on or
after January 1, 2027. Earlier application is permitted.
Note 4 - Fair Value of Financial
Instruments
Fair Value and Carrying Value of Financial Instruments by
Category
Financial assets and financial liabilities are
recognized in the Consolidated Balance Sheet at fair value or at
amortized cost in accordance with the categories set out in the
accounting framework for financial instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at October 31,
2024
|
|
|
|
|
|
|
|
Carrying
value
and fair
value
|
|
Carrying
value
|
|
|
Fair
value
|
|
Total carrying
value
|
Total
fair
value
|
|
|
|
|
|
|
|
Financial
instruments
classified
as
at fair
value
through
profit
or loss
|
|
Financial
instruments
designated
at fair
value
through
profit
or loss
|
|
Debt securities classified
as at fair value through other comprehensive
income
|
|
Equity
securities
designated
at
fair value
through
other
comprehensive
income
|
|
Financial instruments at
amortized cost, net
|
|
|
Financial instruments at
amortized cost, net
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and deposits with financial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
institutions
|
|
−
|
|
−
|
|
−
|
|
−
|
|
31,549
|
|
|
31,549
|
|
31,549
|
31,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
−
|
−
|
|
|
|
Securities
|
|
115,578
|
|
357
|
|
13,956
|
|
666
|
|
14,608
|
|
|
14,551
|
|
145,165
|
145,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities purchased under reverse
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
repurchase agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and securities borrowed
|
|
−
|
|
−
|
|
−
|
|
−
|
|
16,265
|
|
|
16,265
|
|
16,265
|
16,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of allowances
|
|
14,972
|
|
−
|
|
−
|
|
−
|
|
228,060
|
|
|
229,614
|
|
243,032
|
244,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments
|
|
12,309
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
−
|
|
12,309
|
12,309
|
|
|
|
Other assets
|
|
2,059
|
|
−
|
|
−
|
|
−
|
|
3,674
|
|
|
3,674
|
|
5,733
|
5,733
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits(1)
|
|
−
|
|
26,190
|
|
|
|
|
|
307,355
|
|
|
307,553
|
|
333,545
|
333,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations related to securities
sold short
|
|
10,873
|
|
−
|
|
|
|
|
|
−
|
|
|
−
|
|
10,873
|
10,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations related to securities
sold under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
repurchase agreements
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities loaned
|
|
−
|
|
−
|
|
|
|
|
|
38,177
|
|
|
38,177
|
|
38,177
|
38,177
|
|
|
|
Derivative financial
instruments
|
|
15,760
|
|
−
|
|
|
|
|
|
−
|
|
|
−
|
|
15,760
|
15,760
|
|
|
|
Liabilities related to transferred
receivables
|
|
−
|
|
11,034
|
|
|
|
|
|
17,343
|
|
|
17,011
|
|
28,377
|
28,045
|
|
|
|
Other liabilities
|
|
−
|
|
−
|
|
|
|
|
|
4,114
|
|
|
4,114
|
|
4,114
|
4,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated debt
|
|
−
|
|
−
|
|
|
|
|
|
1,258
|
|
|
1,296
|
|
1,258
|
1,296
|
|
(1) Includes embedded
derivative financial instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
October 31, 2023(1)
|
|
|
|
|
|
|
|
Carrying
value
and fair
value
|
|
Carrying
value
|
|
Fair
value
|
|
Total
carrying
value
|
|
Total
fair
value
|
|
|
|
|
|
|
|
Financial
instruments
classified as
at fair
value
through
profit
or
loss
|
|
Financial instruments
designated
at fair
value
through
profit
or
loss
|
|
Debt
securities classified as at fair value through other comprehensive
income
|
|
Equity
securities
designated at
fair
value
through
other
comprehensive income
|
|
Financial
instruments
at
amortized
cost,
net
|
|
Financial
instruments
at
amortized
cost,
net
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and deposits with financial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
institutions
|
|
−
|
|
−
|
|
−
|
|
−
|
|
35,234
|
|
35,234
|
|
35,234
|
|
35,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
99,236
|
|
758
|
|
8,583
|
|
659
|
|
12,582
|
|
12,097
|
|
121,818
|
|
121,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities purchased under reverse
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
repurchase agreements and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities borrowed
|
|
−
|
|
−
|
|
−
|
|
−
|
|
11,260
|
|
11,260
|
|
11,260
|
|
11,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and acceptances, net of allowances
|
|
13,124
|
|
−
|
|
−
|
|
−
|
|
212,319
|
|
210,088
|
|
225,443
|
|
223,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments
|
|
17,516
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
17,516
|
|
17,516
|
|
|
|
Other assets
|
|
73
|
|
−
|
|
−
|
|
−
|
|
4,285
|
|
4,285
|
|
4,358
|
|
4,358
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits(2)
|
|
−
|
|
18,275
|
|
|
|
|
|
269,898
|
|
269,490
|
|
288,173
|
|
287,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceptances
|
|
−
|
|
−
|
|
|
|
|
|
6,627
|
|
6,627
|
|
6,627
|
|
6,627
|
|
|
|
Obligations related to securities
sold short
|
|
13,660
|
|
−
|
|
|
|
|
|
−
|
|
−
|
|
13,660
|
|
13,660
|
|
|
|
Obligations related to securities
sold under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
repurchase agreements
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities loaned
|
|
−
|
|
−
|
|
|
|
|
|
38,347
|
|
38,347
|
|
38,347
|
|
38,347
|
|
|
|
Derivative financial
instruments
|
|
19,888
|
|
−
|
|
|
|
|
|
−
|
|
−
|
|
19,888
|
|
19,888
|
|
|
|
Liabilities related to transferred
receivables
|
|
−
|
|
9,952
|
|
|
|
|
|
15,082
|
|
14,255
|
|
25,034
|
|
24,207
|
|
|
|
Other liabilities
|
|
−
|
|
−
|
|
|
|
|
|
3,497
|
|
3,494
|
|
3,497
|
|
3,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated debt
|
|
−
|
|
−
|
|
|
|
|
|
748
|
|
727
|
|
748
|
|
727
|
|
(1) Certain amounts have
been adjusted to reflect accounting policy changes arising from the
adoption of IFRS 17. For additional information, see Note 2 to
these Consolidated Financial Statements.
(2) Includes embedded
derivative financial instruments.
Establishing Fair Value
The fair value of a financial instrument is the price
that would be received to sell a financial asset or paid to
transfer a financial liability in an orderly transaction in the
principal market at the measurement date under current market
conditions (i.e., an exit price).
Unadjusted quoted prices in active markets provide
the best evidence of fair value. When there is no quoted price in
an active market, the Bank applies other valuation techniques that
maximize the use of relevant observable inputs and that minimize
the use of unobservable inputs. Such valuation techniques include
the following: using information available from recent market
transactions, referring to the current fair value of a comparable
financial instrument, applying discounted cash flow analysis,
applying option pricing models, or relying on any other valuation
technique that is commonly used by market participants and has
proven to yield reliable estimates. Judgment is required when
applying many of the valuation techniques. The Bank's valuation was
based on its assessment of the conditions prevailing as at
October 31, 2024 and may change in the future. Furthermore,
there may be measurement uncertainty resulting from the choice of
valuation model used.
Note 4 - Fair Value of Financial Instruments
(cont.)
Valuation
Governance
Fair value is established in accordance with a
rigorous control framework. The Bank has policies and procedures
that govern the process for determining fair value. These policies
are documented and periodically reviewed by the Risk Management
Group. All valuation models are validated, and controls have been
implemented to ensure that they are applied.
The fair value of existing or new products is
determined and validated by functions independent of the
risk-taking team. Complex fair value matters are reviewed by
valuation committees made up of experts from various specialized
functions.
For financial instruments classified in Level 3 of the
fair value hierarchy, the Bank has documented the hierarchy
classification policies, and controls are in place to ensure that
fair value is measured appropriately, reliably, and consistently.
Valuation methods and the underlying assumptions are regularly
reviewed.
Valuation Methods
and Assumptions
Financial Instruments Whose Fair
Value Equals Carrying Value
The carrying value of the following financial
instruments is a reasonable approximation of fair value:
·
cash and deposits with financial institutions;
·
securities purchased under reverse repurchase agreements and
securities borrowed;
·
obligations related to securities sold under repurchase agreements
and securities loaned;
·
customers' liability under acceptances;
·
acceptances;
·
certain items of other assets and other liabilities.
Securities and Obligations Related
to Securities Sold Short
These financial instruments, except for securities
at amortized cost, are recognized at fair value in the Consolidated
Balance Sheet. Their fair value is based on quoted prices in active
markets, i.e., bid prices for financial assets and offered prices
for financial liabilities. If there are no quoted prices in an
active market, fair value is estimated using prices for securities
that are substantially the same. If such prices are not available,
fair value is determined using valuation techniques that
incorporate assumptions based primarily on observable market inputs
such as current market prices, the contractual prices of the
underlying instruments, the time value of money, credit risk,
interest rate yield curves, and currency rates.
When one or more significant inputs are not
observable in the markets, fair value is established primarily
using internal estimates and data that consider the valuation
policies in effect at the Bank, economic conditions, the
characteristics specific to the financial asset or liability, and
other relevant factors.
Securities Issued
or Guaranteed by Governments
Securities issued or guaranteed by governments
include debt securities of the governments of Canada (federal,
provincial and municipal) as well as debt securities of the U.S.
government (U.S. Treasury), of other U.S. agencies, and of other
foreign governments. Securities whose fair value is based on
unadjusted quoted prices in active markets are classified in Level
1. For those classified in Level 2, quoted prices for identical or
similar instruments in active markets are used to determine fair
value. In the absence of an observable market, a valuation
technique such as the discounted cash flow method could be used,
incorporating assumptions on benchmark yields and the risk spreads
of similar securities.
Equity Securities
and Other Debt Securities
The fair value of equity securities is determined
primarily by using quoted prices in active markets. For equity
securities and other debt securities classified in Level 2, a
valuation technique based on quoted prices of identical and similar
instruments in an active market is used to determine fair value. In
the absence of observable inputs, a valuation technique such as the
discounted cash flow method could be used, incorporating
assumptions on benchmark yields and the risk spreads of similar
securities. For those classified in Level 3, fair value can be
determined based on net asset value, which represents the estimated
value of a security based on valuations received from investment or
fund managers or the general partners of limited partnerships. Fair
value can also be determined using internal valuation techniques
adjusted to reflect financial instrument risk factors and economic
conditions.
Derivative Financial
Instruments
Derivative financial instruments are recorded at fair
value in the Consolidated Balance Sheet. For exchange-traded
derivative financial instruments, fair value is based on quoted
prices in an active market.
For over-the-counter (OTC) derivative financial
instruments, fair value is determined using well established
valuation techniques that incorporate assumptions based primarily
on observable market inputs such as current market prices and the
contractual prices of the underlying instruments, the time value of
money, interest rate yield curves, credit curves, currency rates as
well as price and rate volatility factors. In establishing the fair
value of OTC derivative financial instruments, the Bank also
incorporates the following factors:
Credit Valuation
Adjustment (CVA)
The CVA is a valuation adjustment applied to
derivative financial instruments to reflect the credit risk of the
counterparty. For each counterparty, the CVA is based on the
expected positive exposure and probabilities of default through
time. The exposures are determined by using relevant factors such
as current and potential future market values, master netting
agreements, collateral agreements, and expected recovery rates. The
default probabilities are inferred using credit default swap (CDS)
spreads. When such information is unavailable, relevant proxies are
used. While the general methodology currently assumes independence
between expected positive exposures and probabilities of default,
adjustments are applied to certain types of transactions where
there is a direct link between the exposure at default and the
default probabilities.
Funding Valuation
Adjustment (FVA)
The FVA is a valuation adjustment applied to
derivative financial instruments to reflect the market-implied cost
or benefits of funding collateral for uncollateralized or partly
collateralized transactions. The expected exposures are determined
using methodologies consistent with the CVA framework. The funding
level used to determine the FVA is based on the average funding
level of relevant market participants.
When the valuation techniques incorporate one or more
significant inputs that are not observable in the markets, the fair
value of OTC derivative financial instruments is established
primarily on the basis of internal estimates and data that consider
the valuation policies in effect at the Bank, economic conditions,
the characteristics specific to the financial asset or financial
liability, and other relevant factors.
Loans
The fair value of fixed-rate mortgage loans is
determined by discounting expected future contractual cash flows,
adjusted for several factors, including prepayment options, current
market interest rates for similar loans, and other relevant
variables where applicable. The fair value of variable-rate
mortgage loans is deemed to equal carrying value.
The fair value of other fixed-rate loans is determined
by discounting expected future contractual cash flows using current
market interest rates charged for similar new loans. The fair value
of other variable-rate loans is deemed to equal carrying value.
Deposits
The fair value of fixed-term deposits is determined
primarily by discounting expected future contractual cash flows and
considering several factors such as redemption options and market
interest rates currently offered for financial instruments with
similar conditions. For certain term funding instruments, fair
value is determined using market prices for similar instruments.
The fair value of demand deposits and notice deposits is deemed to
equal carrying value.
The fair value of structured deposit notes is
established using valuation models that maximize the use of
observable inputs when available, such as benchmark indices, and
also incorporates the Bank's own credit risk. In calculating the
Bank's own credit risk, the market implied spreads of the Bank are
used to infer its probabilities of default. Lastly, when fair value
is determined using option pricing models, the valuation techniques
are similar to those described for derivative financial
instruments.
Liabilities Related to Transferred
Receivables
These liabilities arise from sale transactions to
Canada Housing Trust (CHT) of securities backed by insured
residential mortgages and other securities under the Canada
Mortgage Bond (CMB) program. These transactions do not qualify for
derecognition. They are recorded as guaranteed borrowings, which
results in the recording of liabilities in the Consolidated Balance
Sheet. The fair value of these liabilities is established using
valuation techniques based on observable market inputs such as
Canada Mortgage Bond prices.
Note 4 - Fair Value of Financial Instruments
(cont.)
Other Liabilities and Subordinated
Debt
The fair value of these financial liabilities is based
on quoted market prices in an active market. If there is no active
market, fair value is determined by discounting contractual cash
flows using the current market interest rates offered for similar
financial instruments that have the same term to maturity.
Hierarchy of Fair Value Measurements
Determining the
Levels of the Fair Value Measurement Hierarchy
IFRS Accounting Standards
establish a fair value measurement hierarchy that classifies the
inputs used in financial instrument fair value measurement
techniques according to three levels. This fair value hierarchy
requires observable market inputs to be used whenever such inputs
exist. According to the hierarchy, the highest level of inputs are
unadjusted quoted prices in active markets for identical
instruments and the lowest level of inputs are unobservable inputs.
In some cases, the inputs used to measure the fair value of a
financial instrument might be categorized within different levels
of the fair value hierarchy. In those cases, the fair value
measurement is categorized in its entirety in the same level of the
fair value hierarchy as the lowest level input that is significant
to the entire measurement. The fair value measurement hierarchy has
the following levels:
Level 1
Inputs corresponding to unadjusted
quoted prices in active markets for identical assets and
liabilities and accessible to the Bank at the measurement date.
These instruments consist primarily of equity securities,
derivative financial instruments traded in active markets, and
certain highly liquid debt securities actively traded in
over-the-counter markets.
Level 2
Valuation techniques based on
inputs, other than the quoted prices included in Level 1 inputs,
that are directly or indirectly observable in the market for the
asset or liability. These inputs are quoted prices of similar
instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active; inputs other
than quoted prices used in a valuation model that are observable
for that instrument; and inputs that are derived principally from
or corroborated by observable market inputs by correlation or other
means. These instruments consist primarily of certain loans,
certain deposits, derivative financial instruments traded in
over-the-counter markets, certain debt securities, certain equity
securities whose value is not directly observable in an active
market, certain other assets, liabilities related to transferred
receivables, and certain other liabilities.
Level 3
Valuation techniques based on one
or more significant inputs that are not observable in the market
for the asset or liability. The Bank
classifies financial instruments in Level 3 when the valuation
technique is based on at least one significant input that is not
observable in the markets. The valuation technique may also be
partly based on observable market inputs.
Financial instruments whose fair values are
classified in Level 3 consist of the following:
·
financial instruments measured at fair value through profit or
loss: investments in hedge funds for which there are certain
restrictions on unit or security redemptions, equity securities and
debt securities of private companies, as well as certain derivative
financial instruments whose fair value is established using
internal valuation models that are based on significant
unobservable market inputs;
·
securities at fair value through other comprehensive income: equity
and debt securities of private companies;
·
certain loans and certain deposits (structured deposit notes) whose
fair value is established using internal valuation models that are
based on significant unobservable market inputs;
·
certain other assets (receivables) for which fair value is
established using internal valuation models that are based on
significant unobservable market inputs.
Transfers Between
the Fair Value Hierarchy Levels
Transfers of financial instruments between Levels 1
and 2 and transfers to (or from) Level 3 are deemed to have taken
place at the beginning of the quarter in which the transfer
occurred. Significant transfers can occur between the fair value
hierarchy levels due to new information on inputs used to determine
fair value and the observable nature of those inputs.
During fiscal 2024, securities classified as at fair
value through profit or loss of $20 million and obligations related
to securities sold short of $1 million were transferred from Level
2 to Level 1 as a result of changing market conditions (securities
classified as at fair value through profit or loss of
$17 million and obligations related to securities sold short
of $3 million in fiscal 2023). In addition, during fiscal 2024,
securities classified as at fair value through profit or loss of
$17 million and obligations related to securities sold short of $1
million were transferred from Level 1 to Level 2 as a result of
changing market conditions (securities classified as at fair value
through profit or loss of $15 million and obligations related to
securities sold short of $3 million in fiscal 2023).
During fiscal 2024 and 2023, financial instruments
were transferred to (or from) Level 3 due to changes in the
availability of observable market inputs as a result of changing
market conditions.
Financial Instruments Recorded at Fair Value in the
Consolidated Balance Sheet
The following tables show financial
instruments recorded at fair value in the Consolidated Balance
Sheet according to the fair value hierarchy.
|
|
|
|
|
|
|
|
|
As at October 31,
2024
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total financial
assets/liabilities at fair value
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
At fair value through profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities issued or guaranteed
by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian government
|
|
4,150
|
|
10,330
|
|
−
|
|
14,480
|
|
|
|
|
|
|
Canadian provincial and municipal
governments
|
|
−
|
|
8,473
|
|
−
|
|
8,473
|
|
|
|
|
|
|
U.S. Treasury, other U.S. agencies
and other foreign governments
|
|
1,169
|
|
1,046
|
|
−
|
|
2,215
|
|
|
|
|
|
Other debt securities
|
|
−
|
|
3,030
|
|
60
|
|
3,090
|
|
|
|
|
|
Equity securities
|
|
85,414
|
|
1,655
|
|
608
|
|
87,677
|
|
|
|
|
|
|
|
|
90,733
|
|
24,534
|
|
668
|
|
115,935
|
|
|
|
|
At fair value through other comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities issued or guaranteed
by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian government
|
|
170
|
|
5,048
|
|
−
|
|
5,218
|
|
|
|
|
|
|
Canadian provincial and municipal
governments
|
|
−
|
|
2,900
|
|
−
|
|
2,900
|
|
|
|
|
|
|
U.S. Treasury, other U.S. agencies
and other foreign governments
|
|
4,805
|
|
186
|
|
−
|
|
4,991
|
|
|
|
|
|
Other debt securities
|
|
−
|
|
847
|
|
−
|
|
847
|
|
|
|
|
|
Equity securities
|
|
−
|
|
359
|
|
307
|
|
666
|
|
|
|
|
|
|
|
|
4,975
|
|
9,340
|
|
307
|
|
14,622
|
|
|
|
Loans
|
|
−
|
|
14,767
|
|
205
|
|
14,972
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments
|
|
1,139
|
|
11,073
|
|
97
|
|
12,309
|
|
|
|
|
Other assets - Other items
|
|
−
|
|
1,976
|
|
83
|
|
2,059
|
|
|
|
|
96,847
|
|
61,690
|
|
1,360
|
|
159,897
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Deposits(1)
|
|
−
|
|
30,434
|
|
−
|
|
30,434
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations related to securities
sold short
|
|
6,052
|
|
4,821
|
|
−
|
|
10,873
|
|
|
|
|
Derivative financial
instruments
|
|
1,976
|
|
13,758
|
|
26
|
|
15,760
|
|
|
|
|
Liabilities related to transferred
receivables
|
|
−
|
|
11,034
|
|
−
|
|
11,034
|
|
|
|
|
8,028
|
|
60,047
|
|
26
|
|
68,101
|
|
(1) The amounts include the fair value of embedded derivative
financial instruments in deposits.
Note 4 - Fair Value of Financial Instruments
(cont.)
|
|
|
|
|
|
|
|
|
As at
October 31, 2023
|
|
|
|
|
|
|
|
|
Level
1
|
|
Level
2
|
|
Level
3
|
|
Total
financial
assets/liabilities
at fair
value
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
At fair value through profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities issued or guaranteed
by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian government
|
|
6,403
|
|
10,872
|
|
−
|
|
17,275
|
|
|
|
|
|
|
Canadian provincial and municipal
governments
|
|
−
|
|
8,260
|
|
−
|
|
8,260
|
|
|
|
|
|
|
U.S. Treasury, other U.S. agencies
and other foreign governments
|
|
2,781
|
|
2,105
|
|
−
|
|
4,886
|
|
|
|
|
|
Other debt securities
|
|
−
|
|
3,450
|
|
65
|
|
3,515
|
|
|
|
|
|
Equity securities
|
|
65,018
|
|
554
|
|
486
|
|
66,058
|
|
|
|
|
|
|
|
|
74,202
|
|
25,241
|
|
551
|
|
99,994
|
|
|
|
|
At fair value through other comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities issued or guaranteed
by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian government
|
|
73
|
|
4,124
|
|
−
|
|
4,197
|
|
|
|
|
|
|
Canadian provincial and municipal
governments
|
|
−
|
|
1,938
|
|
−
|
|
1,938
|
|
|
|
|
|
|
U.S. Treasury, other U.S. agencies
and other foreign governments
|
|
904
|
|
254
|
|
−
|
|
1,158
|
|
|
|
|
|
Other debt securities
|
|
−
|
|
1,290
|
|
−
|
|
1,290
|
|
|
|
|
|
Equity securities
|
|
−
|
|
281
|
|
378
|
|
659
|
|
|
|
|
|
|
|
|
977
|
|
7,887
|
|
378
|
|
9,242
|
|
|
|
Loans
|
|
−
|
|
12,907
|
|
217
|
|
13,124
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments
|
|
285
|
|
17,224
|
|
7
|
|
17,516
|
|
|
|
|
Other assets - Other items
|
|
−
|
|
−
|
|
73
|
|
73
|
|
|
|
|
|
|
|
75,464
|
|
63,259
|
|
1,226
|
|
139,949
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Deposits(1)
|
|
−
|
|
18,134
|
|
−
|
|
18,134
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations related to securities
sold short
|
|
8,335
|
|
5,325
|
|
−
|
|
13,660
|
|
|
|
|
Derivative financial
instruments
|
|
467
|
|
19,399
|
|
22
|
|
19,888
|
|
|
|
|
Liabilities related to transferred
receivables
|
|
−
|
|
9,952
|
|
−
|
|
9,952
|
|
|
|
|
|
|
|
8,802
|
|
52,810
|
|
22
|
|
61,634
|
|
(1) The amounts include the fair value of embedded derivative
financial instruments in deposits.
Financial
Instruments Classified in Level 3
The Bank classifies financial instruments in Level 3
when the valuation technique is based on at least one significant
input that is not observable in the markets. The valuation
technique may also be based, in part, on observable market inputs.
The table on the following page shows the significant unobservable
inputs used for the fair value measurements of financial
instruments classified in Level 3 of the hierarchy.
|
|
|
|
|
|
|
|
|
|
|
|
|
As at October 31,
2024
|
|
|
|
|
|
|
|
Fair
value
|
|
Primary
valuation techniques
|
|
Significant
unobservable inputs
|
|
Range of input
values
|
|
|
|
|
|
|
|
Low
|
|
High
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities and other debt
securities
|
|
975
|
|
Net
asset value
|
|
Net
asset value
|
|
100
|
%
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Market
comparable
|
|
EV/EBITDA(1) multiple
|
|
13
|
x
|
17
|
x
|
|
|
|
|
|
|
|
|
|
Discounted cash flows
|
|
Discount
rate
|
|
5.50
|
%
|
13.20
|
%
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans at fair value through profit
or loss
|
|
205
|
|
Discounted cash flows
|
|
Discount
rate
|
|
7.31
|
%
|
14.50
|
%
|
|
|
|
|
|
|
|
|
|
Discounted cash flows
|
|
Liquidity premium
|
|
3.53
|
%
|
10.62
|
%
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity contracts
|
|
96
|
|
Option
pricing model
|
|
Long-term volatility
|
|
14
|
%
|
58
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Market
correlation
|
|
(48)
|
%
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity premium
|
|
8
|
%
|
12
|
%
|
|
|
|
|
|
Credit derivative
contracts
|
|
1
|
|
Discounted cash flows
|
|
Credit
spread
|
|
21
|
Bps(2)
|
60
|
Bps(2)
|
|
|
|
Other assets - Other items
|
|
83
|
|
Discounted cash flows
|
|
Discount
rate
|
|
13
|
%
|
13
|
%
|
|
|
|
|
|
|
|
1,360
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
1
|
|
Discounted cash flows
|
|
Discount
rate
|
|
2.20
|
%
|
2.20
|
%
|
|
|
|
|
|
Equity contracts
|
|
22
|
|
Option
pricing model
|
|
Long-term volatility
|
|
13
|
%
|
49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Market
correlation
|
|
(88)
|
%
|
98
|
%
|
|
|
|
|
|
Credit derivative
contracts
|
|
3
|
|
Discounted cash flows
|
|
Credit
spread
|
|
21
|
Bps(2)
|
60
|
Bps(2)
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
October 31, 2023
|
|
|
|
|
|
|
|
Fair
value
|
|
Primary
valuation techniques
|
|
Significant
unobservable inputs
|
|
Range of
input values
|
|
|
|
|
|
|
|
Low
|
|
High
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities and other debt
securities
|
|
929
|
|
Net
asset value
|
|
Net
asset value
|
|
100
|
%
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Market
comparable
|
|
EV/EBITDA(1) multiple
|
|
11
|
x
|
14
|
x
|
|
|
|
|
|
|
|
|
|
Discounted cash flows
|
|
Discount
rate
|
|
6.50
|
%
|
15.10
|
%
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans at fair value through profit
or loss
|
|
217
|
|
Discounted cash flows
|
|
Discount
rate
|
|
8.08
|
%
|
15.99
|
%
|
|
|
|
|
|
|
|
|
|
Discounted cash flows
|
|
Liquidity premium
|
|
3.57
|
%
|
11.32
|
%
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity contracts
|
|
5
|
|
Option
pricing model
|
|
Long-term volatility
|
|
7
|
%
|
58
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Market
correlation
|
|
15
|
%
|
94
|
%
|
|
|
|
|
|
Credit derivative
contracts
|
|
2
|
|
Discounted cash flows
|
|
Credit
spread
|
|
22
|
Bps(2)
|
91
|
Bps(2)
|
|
|
|
Other assets - Other items
|
|
73
|
|
Discounted cash flows
|
|
Discount
rate
|
|
13
|
%
|
13
|
%
|
|
|
|
|
|
|
|
1,226
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
5
|
|
Discounted cash flows
|
|
Discount
rate
|
|
2.20
|
%
|
2.20
|
%
|
|
|
|
|
|
Equity contracts
|
|
16
|
|
Option
pricing model
|
|
Long-term volatility
|
|
7
|
%
|
58
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Market
correlation
|
|
(9)
|
%
|
94
|
%
|
|
|
|
|
|
Credit derivative
contracts
|
|
1
|
|
Discounted cash flows
|
|
Credit
spread
|
|
22
|
Bps(2)
|
91
|
Bps(2)
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
(1) EV/EBITDA means Enterprise Value/Earnings Before Interest,
Taxes, Depreciation and Amortization.
(2) Bps or basis point is a unit of measure equal to
0.01%.
Note 4 - Fair Value of Financial Instruments
(cont.)
Significant
Unobservable Inputs Used for Fair Value Measurements of Financial
Instruments Classified in Level 3
Net Asset Value
Net asset value is the estimated value of a security
based on valuations received from the investment or fund managers,
the administrators of the conduits, or the general partners of
limited partnerships. The net asset value of a fund is the total
fair value of assets less liabilities.
EV/EBITDA (Enterprise
Value/Earnings Before Interest, Taxes, Depreciation and
Amortization) Multiple and Price Equivalent
Private equity valuation inputs include earnings
multiples, which are determined based on comparable companies, and
a higher multiple will translate into a higher fair value. Price
equivalent is a percentage of the market price based on the
liquidity of the security.
Discount Rate
The discount rate is the input used to bring
future cash flows to their present value. A higher discount rate
will translate into a lower fair value.
Liquidity Premium
A liquidity premium may be applied when few or
no transactions exist to support the valuations. A higher liquidity
premium will result in a lower value.
Long-Term Volatility
Volatility is a measure of the expected future
variability of market prices. Volatility is generally observable in
the market through options prices. However, the long-term
volatility of options with a longer maturity might not be
observable. An increase (decrease) in long-term volatility is
generally associated with an increase (decrease) in long-term
correlation. Higher long-term volatility may increase or decrease
an instrument's fair value depending on its terms.
Market Correlation
Correlation is a measure of the inter-relationship
between two different variables. A positive correlation means that
the variables tend to move in the same direction; a negative
correlation means that the variables tend to move in opposite
directions. Correlation is used to measure financial instruments
whose future returns depend on several variables. Changes in
correlation will either increase or decrease a financial
instrument's fair value depending on the terms of its contractual
payout.
Credit Spread
A credit spread (yield) is the difference
between the instrument's yield and a benchmark yield. Benchmark
instruments have high credit quality ratings with similar
maturities. The credit spread therefore represents the discount
rate used to determine the present value of future cash flows of an
asset to reflect the market return required for credit quality in
the estimated cash flows. A higher credit spread will result in a
lower value.
Sensitivity
Analysis of Financial Instruments Classified in Level 3
The Bank performs sensitivity analyses for the fair
value measurements of Level 3 financial instruments, substituting
unobservable inputs with one or more reasonably possible
alternative assumptions.
For equity securities and other debt
securities, the Bank varies significant
unobservable inputs such as net asset values, EV/EBITDA multiples,
or price equivalents and establishes a reasonable fair value range
that could result in a $169 million increase or decrease in
the fair value recorded as at October 31, 2024 (a
$155 million increase or decrease as at October 31,
2023).
For loans, the Bank varies unobservable inputs such
as a liquidity premium and establishes a reasonable fair value
range that could result in a $26 million increase or decrease
in the fair value recorded as at October 31, 2024 (a
$25 million increase or decrease as at October 31,
2023).
For derivative financial instruments, the Bank
varies long-term volatility, market correlation inputs, and credit
spread and establishes a reasonable fair value range. As at
October 31, 2024, for derivative financial instruments, the
net fair value recorded could result in a $54 million increase
or decrease (a $16 million increase or decrease as at
October 31, 2023).
For other assets, the Bank varies unobservable inputs
such as discount rates and establishes a reasonable fair value
range that could result in a $3 million increase or decrease
in the fair value recorded as at October 31, 2024 (a
$9 million increase or decrease as at October 31,
2023).
For all Level 3 financial instruments, the
reasonable fair value ranges could result in a 7% increase or
decrease in net income as at October 31, 2024 (a 6% increase
or decrease in net income as at October 31, 2023).
Change in the
Fair Value of Financial Instruments Classified in Level
3
The Bank may hedge the fair value of financial
instruments classified in the various levels through offsetting
hedge positions. Gains and losses for financial instruments
classified in Level 3 presented in the following tables do not
reflect the inverse gains and losses on financial instruments used
for economic hedging purposes that may have been classified in
Level 1 or 2 by the Bank. In addition, the Bank may hedge the fair
value of financial instruments classified in Level 3 using other
financial instruments classified in Level 3. The effect of
these hedges is not included in the net amount presented in the
following tables. The gains and losses presented hereafter
may comprise changes in fair value based on observable and
unobservable inputs.
|
|
|
|
|
|
|
|
|
Year ended October 31,
2024
|
|
|
|
|
|
Securities
at fair
value
through
profit
or loss
|
|
Securities
at fair
value
through
other
comprehensive
income
|
|
Loans and
other
assets
|
|
Derivative
financial
instruments(1)
|
|
Deposits(2)
|
|
|
Fair value as at October 31,
2023
|
|
551
|
|
378
|
|
290
|
|
(15)
|
|
−
|
|
|
Total realized and unrealized
gains (losses) included in Net
income (3)
|
|
103
|
|
−
|
|
9
|
|
(107)
|
|
−
|
|
|
Total realized and unrealized
gains (losses) included in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
−
|
|
1
|
|
−
|
|
−
|
|
−
|
|
|
Purchases
|
|
135
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Sales
|
|
(121)
|
|
(72)
|
|
(5)
|
|
−
|
|
−
|
|
|
Issuances
|
|
−
|
|
−
|
|
23
|
|
−
|
|
−
|
|
|
Settlements and other
|
|
−
|
|
−
|
|
(29)
|
|
191
|
|
−
|
|
|
Financial instruments transferred
into Level 3
|
|
−
|
|
−
|
|
−
|
|
(3)
|
|
−
|
|
|
Financial instruments transferred
out of Level 3
|
|
−
|
|
−
|
|
−
|
|
5
|
|
−
|
|
|
Fair value as at October 31, 2024
|
|
668
|
|
307
|
|
288
|
|
71
|
|
−
|
|
|
Change in unrealized gains and
losses included in Net
income with respect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to financial assets and financial
liabilities held as at October 31,
2024(4)
|
|
90
|
|
−
|
|
9
|
|
(107)
|
|
−
|
|
|
|
|
|
|
|
|
|
|
Year
ended October 31, 2023
|
|
|
|
|
|
Securities
at fair
value
through
profit
or
loss
|
|
Securities
at fair
value
through
other
comprehensive
income
|
|
Loans
and
other
assets
|
|
Derivative
financial
instruments(1)
|
|
Deposits(2)
|
|
|
Fair value as at October 31,
2022
|
|
476
|
|
320
|
|
331
|
|
(17)
|
|
(8)
|
|
|
Total realized and unrealized
gains (losses) included in Net
income (5)
|
|
33
|
|
−
|
|
(4)
|
|
(15)
|
|
−
|
|
|
Total realized and unrealized
gains (losses) included in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
−
|
|
58
|
|
−
|
|
−
|
|
−
|
|
|
Purchases
|
|
62
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Sales
|
|
(21)
|
|
−
|
|
(9)
|
|
−
|
|
−
|
|
|
Issuances
|
|
−
|
|
−
|
|
29
|
|
−
|
|
−
|
|
|
Settlements and other
|
|
−
|
|
−
|
|
(57)
|
|
7
|
|
−
|
|
|
Financial instruments transferred
into Level 3
|
|
1
|
|
−
|
|
−
|
|
8
|
|
−
|
|
|
Financial instruments transferred
out of Level 3
|
|
−
|
|
−
|
|
−
|
|
2
|
|
8
|
|
|
Fair value as at October 31, 2023
|
|
551
|
|
378
|
|
290
|
|
(15)
|
|
−
|
|
|
Change in unrealized gains and
losses included in Net
income with respect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to financial assets and financial
liabilities held as at October 31,
2023(6)
|
|
62
|
|
−
|
|
(4)
|
|
(15)
|
|
−
|
|
(1) The derivative financial instruments include assets and
liabilities presented on a net basis.
(2) The amounts include the fair value of embedded derivative
financial instruments in deposits.
(3) Total gains (losses) included in Non-interest income was a gain of
$5 million.
(4) Total unrealized gains (losses) included in Non-interest income was an unrealized
loss of $8 million.
(5) Total gains (losses) included in Non-interest income was a gain of
$14 million.
(6) Total unrealized gains (losses) included in Non-interest income was an unrealized
gain of $43 million.
Note 4 - Fair Value of Financial Instruments
(cont.)
Financial Instruments Not Recorded at Fair Value in the
Consolidated Balance Sheet
The following tables show the financial instruments
that have not been recorded at fair value in the Consolidated
Balance Sheet according to the fair value hierarchy, except for
those whose carrying value is a reasonable approximation of fair
value.
|
|
|
|
|
As at October 31,
2024
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
Securities at amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities issued or guaranteed
by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian government
|
|
−
|
|
9,217
|
|
−
|
|
9,217
|
|
|
|
|
|
Canadian provincial and municipal
governments
|
|
−
|
|
2,400
|
|
−
|
|
2,400
|
|
|
|
|
|
U.S. Treasury, other U.S. agencies
and other foreign governments
|
|
506
|
|
178
|
|
−
|
|
684
|
|
|
|
|
Other debt securities
|
|
−
|
|
2,250
|
|
−
|
|
2,250
|
|
|
|
|
506
|
|
14,045
|
|
−
|
|
14,551
|
|
|
|
Loans, net of allowances
|
|
−
|
|
100,618
|
|
128,996
|
|
229,614
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
−
|
|
307,553
|
|
−
|
|
307,553
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities related to transferred
receivables
|
|
−
|
|
17,011
|
|
−
|
|
17,011
|
|
|
|
|
Other liabilities
|
|
−
|
|
49
|
|
−
|
|
49
|
|
|
|
Subordinated debt
|
|
−
|
|
1,296
|
|
−
|
|
1,296
|
|
|
|
|
−
|
|
325,909
|
|
−
|
|
325,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
October 31, 2023
|
|
|
|
|
|
|
|
|
Level
1
|
|
Level
2
|
|
Level
3
|
|
Total
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
Securities at amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities issued or guaranteed
by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian government
|
|
−
|
|
5,935
|
|
−
|
|
5,935
|
|
|
|
|
|
Canadian provincial and municipal
governments
|
|
−
|
|
1,772
|
|
−
|
|
1,772
|
|
|
|
|
|
U.S. Treasury, other U.S. agencies
and other foreign governments
|
|
−
|
|
593
|
|
−
|
|
593
|
|
|
|
|
Other debt securities
|
|
−
|
|
3,797
|
|
−
|
|
3,797
|
|
|
|
|
|
|
|
|
−
|
|
12,097
|
|
−
|
|
12,097
|
|
|
|
Loans, net of allowances
|
|
−
|
|
86,887
|
|
116,627
|
|
203,514
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
−
|
|
269,490
|
|
−
|
|
269,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities related to transferred
receivables
|
|
−
|
|
14,255
|
|
−
|
|
14,255
|
|
|
|
|
Other liabilities
|
|
−
|
|
46
|
|
−
|
|
46
|
|
|
|
Subordinated debt
|
|
−
|
|
727
|
|
−
|
|
727
|
|
|
|
|
−
|
|
284,518
|
|
−
|
|
284,518
|
|
Note 5 - Financial Instruments Designated at Fair Value
Through Profit or Loss
The Bank chose to designate certain financial
instruments at fair value through profit or loss according to the
criteria presented in Note 1 to these Consolidated Financial
Statements. Consistent with its risk management strategy and
in accordance with the fair value option, which permits the
designation if it eliminates or significantly reduces a measurement
or recognition inconsistency that would otherwise arise from
measuring financial assets and liabilities or recognizing the gains
and losses thereon on different bases, the Bank designated
certain securities and certain liabilities related to
transferred receivables at fair value through profit or loss. The
fair value of liabilities related to transferred receivables does
not include credit risk, as the holders of these liabilities are
not exposed to the Bank's credit risk. The Bank also designated
certain deposits that include embedded derivative financial
instruments at fair value through profit or loss.
To determine a change in fair value arising from a
change in the credit risk of deposits designated at fair value
through profit or loss, the Bank calculates, at the beginning of
the period, the present value of the instrument's contractual cash
flows using the following rates: first, an observed discount rate
for similar securities that reflects the Bank's credit spread and,
then, a rate that excludes the Bank's credit spread. The difference
obtained between the two values is then compared to the difference
obtained using the same rates at the end of the period.
Information about the financial assets and financial
liabilities designated at fair value through profit or loss is
provided in the following tables.
|
|
|
|
Carrying
value as
at
October 31,
2024
|
|
Unrealized
gains
(losses)
for the year
ended
October 31,
2024
|
|
Unrealized
gains
(losses)
since the
initial
recognition
of
the
instrument
|
|
|
Financial assets designated at fair value through profit or
loss
|
|
|
|
|
|
|
|
|
|
Securities
|
|
357
|
|
13
|
|
8
|
|
|
Financial liabilities designated at fair value through profit
or loss
|
|
|
|
|
|
|
|
|
|
Deposits(1)(2)
|
|
26,190
|
|
(2,526)
|
|
1,212
|
|
|
|
Liabilities related to transferred
receivables
|
|
11,034
|
|
(213)
|
|
136
|
|
|
|
|
37,224
|
|
(2,739)
|
|
1,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
value as
at
October
31, 2023
|
|
Unrealized
gains
(losses)
for the
year ended
October
31, 2023
|
|
Unrealized
gains
(losses)
since
the initial
recognition of
the
instrument
|
|
|
Financial assets designated at fair value through profit or
loss
|
|
|
|
|
|
|
|
|
|
Securities
|
|
758
|
|
(5)
|
|
(12)
|
|
|
Financial liabilities designated at fair value through profit
or loss
|
|
|
|
|
|
|
|
|
|
Deposits(1)(2)
|
|
18,275
|
|
493
|
|
3,546
|
|
|
|
Liabilities related to transferred
receivables
|
|
9,952
|
|
80
|
|
562
|
|
|
|
|
28,227
|
|
573
|
|
4,108
|
|
(1) For the year ended
October 31, 2024, the change in the fair value of deposits
designated at fair value through profit or loss attributable to
credit risk, and recorded in Other comprehensive income, resulted
in a loss of $485 million (loss of $226 million for the
year ended October 31, 2023).
(2) The amount at
maturity that the Bank will be contractually required to pay to the
holders of these deposits varies and will differ from the reporting
date fair value.
Note 6 - Offsetting Financial Assets and Financial
Liabilities
Financial assets and liabilities are offset, and the
net amount is presented in the Consolidated Balance Sheet when the
Bank has a legally enforceable right to set off the recognized
amounts and intends to settle on a net basis or to realize the
asset and settle the liability simultaneously.
Generally, over-the-counter derivative financial
instruments subject to master netting agreements of the
International Swaps & Derivatives Association, Inc. or other
similar agreements do not meet the offsetting criteria in the
Consolidated Balance Sheet, because the right of set-off is legally
enforceable only in the event of default, insolvency, or
bankruptcy.
Generally, securities purchased under reverse
repurchase agreements and securities borrowed as well as
obligations related to securities sold under repurchase agreements
and securities loaned, subject to master agreements, do not meet
the offsetting criteria if they confer only a right of set-off that
is enforceable only in the event of default, insolvency, or
bankruptcy.
However, the above-mentioned transactions may be
subject to contractual netting agreements concluded with clearing
houses. If the offsetting criteria are met, these transactions are
netted in the Consolidated Balance Sheet. In addition, as part of
these transactions, the Bank may pledge or receive cash or other
financial instruments used as collateral.
The following tables present information on financial
assets and financial liabilities that are netted in the
Consolidated Balance Sheet, because they meet the offsetting
criteria as well as information on those that are not netted and
are subject to an enforceable master netting agreement or similar
agreement.
|
|
|
|
|
|
|
|
|
|
|
As at October 31,
2024
|
|
|
|
|
|
|
|
Gross amounts
recognized
|
|
Amounts
set off in
the
Consolidated
Balance
Sheet(1)
|
|
Net
amounts
reported
in the
Consolidated
Balance
Sheet
|
|
Associated
amounts
not set off in
the
Consolidated Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
instruments(2)
|
|
Financial
assets
received/pledged
as
collateral(3)
|
|
Net
amounts
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities purchased under reverse
repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agreements and securities
borrowed
|
|
34,247
|
|
17,982
|
|
16,265
|
|
3,815
|
|
12,378
|
|
72
|
|
|
|
Derivative financial
instruments
|
|
12,309
|
|
−
|
|
12,309
|
|
6,410
|
|
2,701
|
|
3,198
|
|
|
|
|
|
|
|
46,556
|
|
17,982
|
|
28,574
|
|
10,225
|
|
15,079
|
|
3,270
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations related to securities
sold under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
repurchase agreements and
securities loaned
|
|
56,159
|
|
17,982
|
|
38,177
|
|
3,815
|
|
34,309
|
|
53
|
|
|
|
Derivative financial
instruments
|
|
15,760
|
|
−
|
|
15,760
|
|
6,410
|
|
5,256
|
|
4,094
|
|
|
|
|
|
|
|
71,919
|
|
17,982
|
|
53,937
|
|
10,225
|
|
39,565
|
|
4,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
October 31, 2023
|
|
|
|
|
|
|
|
Gross
amounts recognized
|
|
Amounts
set off
in the
Consolidated
Balance
Sheet(1)
|
|
Net
amounts
reported
in
the
Consolidated
Balance
Sheet
|
|
Associated amounts
not set
off in the
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments(2)
|
|
Financial assets
received/pledged
as
collateral(3)
|
|
Net
amounts
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities purchased under reverse
repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agreements and securities
borrowed
|
|
20,344
|
|
9,084
|
|
11,260
|
|
2,538
|
|
8,649
|
|
73
|
|
|
|
Derivative financial
instruments
|
|
35,404
|
|
17,888
|
|
17,516
|
|
8,032
|
|
7,065
|
|
2,419
|
|
|
|
|
|
|
|
55,748
|
|
26,972
|
|
28,776
|
|
10,570
|
|
15,714
|
|
2,492
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations related to securities
sold under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
repurchase agreements and
securities loaned
|
|
47,431
|
|
9,084
|
|
38,347
|
|
2,538
|
|
35,679
|
|
130
|
|
|
|
Derivative financial
instruments
|
|
37,776
|
|
17,888
|
|
19,888
|
|
8,032
|
|
5,703
|
|
6,153
|
|
|
|
|
|
|
|
85,207
|
|
26,972
|
|
58,235
|
|
10,570
|
|
41,382
|
|
6,283
|
|
(1) Comprises amounts that qualify for offsetting. Effective in
fiscal 2024, certain derivative financial instruments cleared
through a central counterparty were considered settled-to-market
and not collaterized-to-market. Derivative financial instruments
that are settled-to-market are settled on a daily basis, resulting
in derecognition, rather than offsetting, of the related
amounts.
(2) Carrying amount of financial instruments that are subject to
an enforceable master netting agreement or similar agreement but
that do not satisfy offsetting criteria.
(3) Excludes collateral in the form of non-financial
instruments.
Note 7 - Securities
Residual Contractual Maturities of
Securities
|
As at October 31
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
1
year
or less
|
|
Over 1
year to
5
years
|
|
Over
5
years
|
|
No
specified
maturity
|
|
Total
|
|
Total
|
|
|
Securities at fair value through profit or
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities issued or guaranteed
by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian government
|
|
2,541
|
|
9,442
|
|
2,497
|
|
−
|
|
14,480
|
|
17,275
|
|
|
|
Canadian provincial and municipal
governments
|
|
762
|
|
2,476
|
|
5,235
|
|
−
|
|
8,473
|
|
8,260
|
|
|
|
U.S. Treasury, other U.S.
agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and other foreign
governments
|
|
203
|
|
845
|
|
1,167
|
|
−
|
|
2,215
|
|
4,886
|
|
|
Other debt securities
|
|
384
|
|
1,675
|
|
1,031
|
|
−
|
|
3,090
|
|
3,515
|
|
|
Equity securities
|
|
−
|
|
−
|
|
−
|
|
87,677
|
|
87,677
|
|
66,058
|
|
|
|
|
3,890
|
|
14,438
|
|
9,930
|
|
87,677
|
|
115,935
|
|
99,994
|
|
|
Securities at fair value through other comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities issued or guaranteed
by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian government
|
|
308
|
|
2,723
|
|
2,187
|
|
−
|
|
5,218
|
|
4,197
|
|
|
|
Canadian provincial and municipal
governments
|
|
−
|
|
519
|
|
2,381
|
|
−
|
|
2,900
|
|
1,938
|
|
|
|
U.S. Treasury, other U.S.
agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and other foreign
governments
|
|
−
|
|
4,951
|
|
40
|
|
−
|
|
4,991
|
|
1,158
|
|
|
Other debt securities
|
|
133
|
|
358
|
|
356
|
|
−
|
|
847
|
|
1,290
|
|
|
Equity securities
|
|
−
|
|
−
|
|
−
|
|
666
|
|
666
|
|
659
|
|
|
|
|
441
|
|
8,551
|
|
4,964
|
|
666
|
|
14,622
|
|
9,242
|
|
|
Securities at amortized cost(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities issued or guaranteed
by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian government
|
|
1,139
|
|
8,055
|
|
−
|
|
−
|
|
9,194
|
|
6,172
|
|
|
|
Canadian provincial and municipal
governments
|
|
371
|
|
595
|
|
1,492
|
|
−
|
|
2,458
|
|
1,932
|
|
|
|
U.S. Treasury, other U.S.
agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and other foreign
governments
|
|
540
|
|
147
|
|
−
|
|
−
|
|
687
|
|
604
|
|
|
Other debt securities
|
|
1,043
|
|
1,121
|
|
105
|
|
−
|
|
2,269
|
|
3,874
|
|
|
|
|
|
|
|
3,093
|
|
9,918
|
|
1,597
|
|
−
|
|
14,608
|
|
12,582
|
|
(1) As at October 31,
2024, securities at amortized cost are presented net of allowances
for credit losses of $6 million ($4 million as at
October 31, 2023).
Credit Quality
As at October 31, 2024 and
2023, securities at fair value through other comprehensive income
and securities at amortized cost were mainly classified in
Stage 1, with their credit quality falling mostly in the
"Excellent" category according to the Bank's internal risk-rating
categories. For additional information on the reconciliation of
allowances for credit losses, see Note 8 to these Consolidated
Financial Statements.
Note 7 - Securities
(cont.)
Unrealized Gross Gains (Losses) on Securities at Fair Value
Through
Other Comprehensive Income(1)
|
|
|
As at October 31,
2024
|
|
|
|
|
|
Amortized
cost
|
|
Gross unrealized
gains
|
|
Gross unrealized
losses
|
|
Carrying
value(2)
|
|
|
Securities issued or guaranteed
by
|
|
|
|
|
|
|
|
|
|
|
|
Canadian government
|
|
5,166
|
|
96
|
|
(44)
|
|
5,218
|
|
|
|
Canadian provincial and municipal
governments
|
|
2,894
|
|
45
|
|
(39)
|
|
2,900
|
|
|
|
U.S. Treasury, other U.S. agencies
and other foreign governments
|
|
4,986
|
|
37
|
|
(32)
|
|
4,991
|
|
|
Other debt securities
|
|
888
|
|
3
|
|
(44)
|
|
847
|
|
|
Equity securities
|
|
591
|
|
77
|
|
(2)
|
|
666
|
|
|
|
|
14,525
|
|
258
|
|
(161)
|
|
14,622
|
|
|
|
|
As at
October 31, 2023
|
|
|
|
|
|
Amortized
cost
|
|
Gross
unrealized gains
|
|
Gross
unrealized losses
|
|
Carrying
value(2)
|
|
|
Securities issued or guaranteed
by
|
|
|
|
|
|
|
|
|
|
|
|
Canadian government
|
|
4,406
|
|
1
|
|
(210)
|
|
4,197
|
|
|
|
Canadian provincial and municipal
governments
|
|
2,110
|
|
−
|
|
(172)
|
|
1,938
|
|
|
|
U.S. Treasury, other U.S. agencies
and other foreign governments
|
|
1,227
|
|
−
|
|
(69)
|
|
1,158
|
|
|
Other debt securities
|
|
1,423
|
|
−
|
|
(133)
|
|
1,290
|
|
|
Equity securities
|
|
616
|
|
66
|
|
(23)
|
|
659
|
|
|
|
|
9,782
|
|
67
|
|
(607)
|
|
9,242
|
|
(1) Excludes the impact of hedging.
(2) The allowances for credit losses on securities at fair value
through other comprehensive income (excluding equity securities),
representing $3 million as at October 31, 2024 ($3 million as
at October 31, 2023), are reported under Other comprehensive income. For
additional information, see Note 8 to these Consolidated
Financial Statements.
Equity
Securities Designated at Fair Value Through Other Comprehensive
Income
The Bank designated certain equity
securities, the main business objective of which is to generate
dividend income, at fair value through other comprehensive income
without subsequent reclassification of gains and losses to net
income. During the year ended October 31, 2024, a dividend
income amount of $41 million was recognized for these
investments ($33 million for the year ended
October 31, 2023), including amounts of $7 million
for investments that were sold during the year ended
October 31, 2024 ($2 million for investments that
were sold during the year ended
October 31, 2023).
|
|
|
|
|
Year ended October 31,
2024
|
|
Year
ended October 31, 2023
|
|
|
|
|
|
|
Equity
securities
of private
companies
|
|
Equity
securities
of public
companies
|
|
Total
|
|
Equity
securities
of
private companies
|
|
Equity
securities
of
public companies
|
|
Total
|
|
|
Fair value at beginning
|
|
378
|
|
281
|
|
659
|
|
320
|
|
236
|
|
556
|
|
|
|
Change in fair value
|
|
1
|
|
58
|
|
59
|
|
58
|
|
(5)
|
|
53
|
|
|
|
Designated at fair value through
other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive
income(1)
|
|
−
|
|
253
|
|
253
|
|
−
|
|
314
|
|
314
|
|
|
|
Sales(2)
|
|
(72)
|
|
(233)
|
|
(305)
|
|
−
|
|
(264)
|
|
(264)
|
|
|
Fair value at end
|
|
307
|
|
359
|
|
666
|
|
378
|
|
281
|
|
659
|
|
(1)
On May 2, 2023, the Bank had concluded that
it had lost significant influence over TMX Group Limited (TMX) and
therefore, as of this date, ceased using the equity method to
account for this investment. The Bank had designated its investment
in TMX as a financial asset measured at fair value through other
comprehensive income in an amount of $191 million.
(2)
The Bank disposed of private and public company
equity securities for economic reasons.
Gains (Losses) on Disposals of Securities at Amortized
Cost
During the years ended October 31, 2024 and
2023, the Bank disposed of certain debt securities measured at
amortized cost. The carrying value of these securities upon
disposal was $1,419 million for the year ended
October 31, 2024 ($821 million for the year ended
October 31, 2023), and the Bank recognized gains of $6 million
for the year ended October 31, 2024 (negligible amount
for the year ended October 31, 2023) under Non-interest income - Gains (losses) on
non‑trading securities, net in the Consolidated Statement of
Income.
Note 8 - Loans and Allowances for Credit
Losses
Loans are recognized either at fair value
through profit or loss or at amortized cost using the financial
asset classification criteria defined in IFRS 9.
Determining and Measuring Expected Credit Losses
(ECL)
Determining
Expected Credit Losses
Expected credit losses are determined using a
three-stage impairment approach that is based on the change in the
credit quality of financial assets since initial
recognition.
Non-impaired loans
Stage
1
Financial assets that have experienced no
significant increase in credit risk between initial
recognition and the reporting date, and for which 12‑month
expected credit losses are recorded at the reporting date, are
classified in Stage 1.
Stage
2
Financial assets that have experienced a significant
increase in credit risk between initial recognition and the
reporting date, and for which lifetime expected credit losses are
recorded at the reporting date, are classified in
Stage 2.
Impaired loans
Stage
3
Financial assets for which there is objective evidence
of impairment, for which one or more events have had a detrimental
impact on the estimated future cash flows of these financial assets
at the reporting date, and for which lifetime expected credit
losses are recorded, are classified in Stage 3.
POCI
Financial assets that are credit-impaired when
purchased or originated (POCI) are classified in the POCI
category.
Impairment
Governance
A rigorous control framework is applied to the
determination of expected credit losses. The Bank has policies and
procedures that govern impairments arising from credit risk. These
policies are documented and periodically reviewed by the Risk
Management Group. All models used to calculate expected credit
losses are validated, and controls are in place to ensure they are
applied.
These models are validated by groups that are
independent of the team that prepares the calculations. Complex
questions on measurement methodologies and assumptions are reviewed
by a group of experts from various functions. Furthermore, the
inputs and assumptions used to determine expected credit losses are
regularly reviewed.
Measurement
of Expected Credit Losses (ECL)
Expected credit losses are estimated using three
main variables: (1) probability of default (PD), (2) loss given
default (LGD) and (3) exposure at default (EAD). For
accounting purposes, 12-month PD and lifetime PD are the
probabilities of a default occurring over the next 12 months or
over the life of a financial instrument, respectively, based on
conditions existing at the balance sheet date and on future
economic conditions that have, or will have, an impact on credit
risk. LGD reflects the losses expected should default occur and
considers such factors as the mitigating effects of collateral, the
realizable value thereof, and the time value of money. EAD is the
expected balance owing at default and considers such factors as
repayments of principal and interest between the balance sheet date
and the time of default as well as any amounts expected to be drawn
on a committed facility. Twelve-month expected credit losses are
estimated by multiplying 12-month PD by LGD and by EAD. Lifetime
expected credit losses are estimated using the lifetime
PD.
For most financial instruments,
expected credit losses are measured on an individual basis.
Financial instruments that have credit losses measured on a
collective basis are grouped according to similar credit risk
characteristics such as type of instrument, geographic location,
comparable risk level, and business sector or industry.
Inputs,
Assumptions and Estimation Techniques
The Bank's approach to calculating expected
credit losses consists essentially of leveraging existing
regulatory models and then adjusting their parameters for
IFRS 9 purposes. These models have the advantage of having
been thoroughly tested and validated. In addition, using the same
base models, regardless of the purpose, provides consistency across
risk assessments. These models use inputs, assumptions and
estimation techniques that require a high degree of management
judgment. The main factors that contribute to changes in ECL that
are subject to significant judgment include the
following:
·
calibration of regulatory parameters in order to obtain
point-in-time and forward-looking parameters;
·
forecasts of macroeconomic variables for multiple scenarios
and the probability weighting of the scenarios;
·
determination of the significant increases in credit risk
(SICR) of a loan.
Note 8 - Loans and Allowances for
Credit Losses (cont.)
Main Parameters
PD
Estimates
Since the objective of the regulatory
calibration of PD is to align historical data to the long-run
default rate, adjustments are required to obtain a point-in-time,
forward-looking PD, as required by IFRS 9. The Bank performs the
following: (1) A point-in-time calibration, where the PD of the
portfolio is aligned with the appropriate default rate. The
resulting PD estimate generally equals the prior-year default rate.
The prior-year default rate is selected for the calibration
performed at this stage, as it often reflects one of the most
accurate and appropriate estimates of the current-year default
rate; (2) Forward-looking adjustments are incorporated through,
among other measures, a calibration factor based on forecasts
produced by the stress testing team's analyses. The team considers
three macroeconomic scenarios, and, for each scenario, produces a
forward-looking assessment covering the three upcoming
years.
LGD
Estimates
The LGD estimation method consists of using, for each
of the three macroeconomic scenarios, expected LGD based on the LGD
values observed using backtesting, the economic LGD estimated and
used to calculate economic capital, and lastly, the estimated
downturn LGD used to calculate regulatory capital.
EAD
Estimates
For term loans, the Bank uses expected EAD,
which is the outstanding balance anticipated at each point in time.
Expected EAD decreases over time according to contractual
repayments and to prepayments. For revolving loans, the EAD
percentage is based on the percentage estimated by the
corresponding regulatory model and, thereafter, is converted to
dollars according to the authorized balance.
Expected
Life
For most financial instruments, the expected
life used when measuring expected credit losses is the remaining
contractual life. For revolving financial instruments where there
is no contractual maturity, such as credit cards or lines of
credit, the expected life is based on the behavioural life of
clients who have defaulted or closed their account.
Incorporation of Forward-Looking
Information
The Bank's Economy and Strategy Group is
responsible for developing three macroeconomic scenarios and for
recommending probability weights for each scenario. Macroeconomic
scenarios are not developed for specific portfolios, as the Economy
and Strategy Group provides a set of variables for each of the
defined scenarios for the next three years. The PDs are also
adjusted to incorporate economic assumptions (interest rates,
unemployment rates, GDP forecasts, oil prices, housing price
indices, etc.) that can be statistically tied to PD changes that
will have an impact beyond the next 12 months. These statistical
relationships are determined using the processes developed for
stress testing. In addition, the group considers other relevant
factors that may not be adequately reflected in the information
used to calculate the PDs (including late payments and whether the
financial asset is subject to additional monitoring within the
watchlist process for business and government loan
portfolios).
Determination of a Significant
Increase in the Credit Risk of a Financial Instrument
At each reporting period, the Bank determines
whether credit risk has increased significantly since initial
recognition by examining the change in the risk of default
occurring over the remaining life of the financial instrument.
First, the Bank compares the point-in-time forward-looking
remaining lifetime PD at the reporting date with the expected
point-in-time forward-looking remaining lifetime PD established at
initial recognition. Based on this comparison, the Bank determines
whether the loan has deteriorated when compared to the initial
conditions. Because the comparison includes an adjustment based on
origination‑date forward-looking information and reporting-date
forward-looking information, the deterioration may be caused by the
following factors: (i) deterioration of the economic outlook
used in the forward-looking assessment; (ii) deterioration of
the borrower's conditions (payment defaults, worsening financial
ratios, etc.); or (iii) a combination of both factors. The
quantitative criteria used to determine a significant increase in
credit risk are a series of relative and absolute thresholds, and a
backstop is also applied. All financial instruments that are over
30 days past due but below 90 days past due are migrated to Stage
2, even if the other criteria do not indicate a significant
increase in credit risk.
Credit Quality of Loans
The following tables present the gross
carrying amounts of loans as at October 31,
2024 and 2023, according to credit quality and ECL
impairment stage of each loan category at amortized cost, and
according to credit quality for loans at fair value through profit
or loss. For additional information on credit quality according to
the Internal Ratings-Based (IRB) categories, see the Internal
Default Risk Ratings table on page 81 in the Credit Risk section of
the MD&A for the year ended October 31, 2024.
|
|
|
|
|
|
|
|
|
As at October 31,
2024
|
|
|
|
|
Non-impaired
loans
|
|
Impaired
loans
|
|
Loans at fair
value
through profit or
loss(1)
|
|
Total
|
|
|
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI
|
|
|
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excellent
|
|
33,651
|
|
16
|
|
−
|
|
−
|
|
−
|
|
33,667
|
|
|
Good
|
|
17,063
|
|
241
|
|
−
|
|
−
|
|
−
|
|
17,304
|
|
|
Satisfactory
|
|
12,634
|
|
4,209
|
|
−
|
|
−
|
|
−
|
|
16,843
|
|
|
Special mention
|
|
358
|
|
800
|
|
−
|
|
−
|
|
−
|
|
1,158
|
|
|
Substandard
|
|
70
|
|
300
|
|
−
|
|
−
|
|
−
|
|
370
|
|
|
Default
|
|
−
|
|
−
|
|
118
|
|
−
|
|
−
|
|
118
|
|
|
IRB Approach
|
|
63,776
|
|
5,566
|
|
118
|
|
−
|
|
−
|
|
69,460
|
|
|
Standardized Approach
|
|
11,350
|
|
266
|
|
494
|
|
247
|
|
13,192
|
|
25,549
|
|
|
Gross carrying amount
|
|
75,126
|
|
5,832
|
|
612
|
|
247
|
|
13,192
|
|
95,009
|
|
|
Allowances for credit
losses(2)
|
|
62
|
|
85
|
|
137
|
|
(87)
|
|
−
|
|
197
|
|
|
Carrying amount
|
|
75,064
|
|
5,747
|
|
475
|
|
334
|
|
13,192
|
|
94,812
|
|
|
Personal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excellent
|
|
21,702
|
|
274
|
|
−
|
|
−
|
|
−
|
|
21,976
|
|
|
Good
|
|
6,686
|
|
1,618
|
|
−
|
|
−
|
|
−
|
|
8,304
|
|
|
Satisfactory
|
|
6,959
|
|
2,247
|
|
−
|
|
−
|
|
−
|
|
9,206
|
|
|
Special mention
|
|
2,111
|
|
845
|
|
−
|
|
−
|
|
−
|
|
2,956
|
|
|
Substandard
|
|
53
|
|
279
|
|
−
|
|
−
|
|
−
|
|
332
|
|
|
Default
|
|
−
|
|
−
|
|
226
|
|
−
|
|
−
|
|
226
|
|
|
IRB Approach
|
|
37,511
|
|
5,263
|
|
226
|
|
−
|
|
−
|
|
43,000
|
|
|
Standardized Approach
|
|
3,580
|
|
84
|
|
101
|
|
118
|
|
−
|
|
3,883
|
|
|
Gross carrying amount
|
|
41,091
|
|
5,347
|
|
327
|
|
118
|
|
−
|
|
46,883
|
|
|
Allowances for credit
losses(2)
|
|
102
|
|
123
|
|
146
|
|
(11)
|
|
−
|
|
360
|
|
|
Carrying amount
|
|
40,989
|
|
5,224
|
|
181
|
|
129
|
|
−
|
|
46,523
|
|
|
Credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excellent
|
|
551
|
|
−
|
|
−
|
|
−
|
|
−
|
|
551
|
|
|
Good
|
|
399
|
|
−
|
|
−
|
|
−
|
|
−
|
|
399
|
|
|
Satisfactory
|
|
729
|
|
28
|
|
−
|
|
−
|
|
−
|
|
757
|
|
|
Special mention
|
|
484
|
|
211
|
|
−
|
|
−
|
|
−
|
|
695
|
|
|
Substandard
|
|
69
|
|
149
|
|
−
|
|
−
|
|
−
|
|
218
|
|
|
Default
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
IRB Approach
|
|
2,232
|
|
388
|
|
−
|
|
−
|
|
−
|
|
2,620
|
|
|
Standardized Approach
|
|
141
|
|
−
|
|
−
|
|
−
|
|
−
|
|
141
|
|
|
Gross carrying amount
|
|
2,373
|
|
388
|
|
−
|
|
−
|
|
−
|
|
2,761
|
|
|
Allowances for credit
losses(2)
|
|
42
|
|
114
|
|
−
|
|
−
|
|
−
|
|
156
|
|
|
Carrying amount
|
|
2,331
|
|
274
|
|
−
|
|
−
|
|
−
|
|
2,605
|
|
|
Business and government
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excellent
|
|
7,743
|
|
−
|
|
−
|
|
−
|
|
1,486
|
|
9,229
|
|
|
Good
|
|
27,950
|
|
7
|
|
−
|
|
−
|
|
53
|
|
28,010
|
|
|
Satisfactory
|
|
34,626
|
|
11,381
|
|
−
|
|
−
|
|
147
|
|
46,154
|
|
|
Special mention
|
|
255
|
|
1,770
|
|
−
|
|
−
|
|
−
|
|
2,025
|
|
|
Substandard
|
|
2
|
|
481
|
|
−
|
|
2
|
|
−
|
|
485
|
|
|
Default
|
|
−
|
|
−
|
|
555
|
|
10
|
|
−
|
|
565
|
|
|
IRB Approach
|
|
70,576
|
|
13,639
|
|
555
|
|
12
|
|
1,686
|
|
86,468
|
|
|
Standardized Approach
|
|
12,879
|
|
107
|
|
158
|
|
14
|
|
94
|
|
13,252
|
|
|
Gross carrying amount
|
|
83,455
|
|
13,746
|
|
713
|
|
26
|
|
1,780
|
|
99,720
|
|
|
Allowances for credit
losses(2)
|
|
218
|
|
181
|
|
225
|
|
4
|
|
−
|
|
628
|
|
|
Carrying amount
|
|
83,237
|
|
13,565
|
|
488
|
|
22
|
|
1,780
|
|
99,092
|
|
|
Total loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
|
202,045
|
|
25,313
|
|
1,652
|
|
391
|
|
14,972
|
|
244,373
|
|
|
Allowances for credit
losses(2)
|
|
424
|
|
503
|
|
508
|
|
(94)
|
|
−
|
|
1,341
|
|
|
Carrying amount
|
|
201,621
|
|
24,810
|
|
1,144
|
|
485
|
|
14,972
|
|
243,032
|
|
(1) Not subject to expected credit losses.
(2) The allowances for credit losses do not include the amounts
related to undrawn commitments reported under Other liabilities in the Consolidated
Balance Sheet.
Note 8 - Loans and Allowances for
Credit Losses (cont.)
|
|
|
|
|
|
|
|
|
As at
October 31, 2023
|
|
|
|
|
Non-impaired loans
|
|
Impaired
loans
|
|
Loans at
fair value
through
profit or loss(1)
|
|
Total
|
|
|
|
|
Stage
1
|
|
Stage
2
|
|
Stage
3
|
|
POCI
|
|
|
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excellent
|
|
30,075
|
|
13
|
|
−
|
|
−
|
|
−
|
|
30,088
|
|
|
Good
|
|
17,008
|
|
247
|
|
−
|
|
−
|
|
−
|
|
17,255
|
|
|
Satisfactory
|
|
11,795
|
|
4,118
|
|
−
|
|
−
|
|
−
|
|
15,913
|
|
|
Special mention
|
|
318
|
|
773
|
|
−
|
|
−
|
|
−
|
|
1,091
|
|
|
Substandard
|
|
61
|
|
252
|
|
−
|
|
−
|
|
−
|
|
313
|
|
|
Default
|
|
−
|
|
−
|
|
66
|
|
−
|
|
−
|
|
66
|
|
|
IRB Approach
|
|
59,257
|
|
5,403
|
|
66
|
|
−
|
|
−
|
|
64,726
|
|
|
Standardized Approach
|
|
9,540
|
|
218
|
|
287
|
|
304
|
|
11,772
|
|
22,121
|
|
|
Gross carrying amount
|
|
68,797
|
|
5,621
|
|
353
|
|
304
|
|
11,772
|
|
86,847
|
|
|
Allowances for credit
losses(2)
|
|
69
|
|
93
|
|
87
|
|
(95)
|
|
−
|
|
154
|
|
|
Carrying amount
|
|
68,728
|
|
5,528
|
|
266
|
|
399
|
|
11,772
|
|
86,693
|
|
|
Personal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excellent
|
|
21,338
|
|
120
|
|
−
|
|
−
|
|
−
|
|
21,458
|
|
|
Good
|
|
7,360
|
|
1,665
|
|
−
|
|
−
|
|
−
|
|
9,025
|
|
|
Satisfactory
|
|
6,497
|
|
2,240
|
|
−
|
|
−
|
|
−
|
|
8,737
|
|
|
Special mention
|
|
1,849
|
|
810
|
|
−
|
|
−
|
|
−
|
|
2,659
|
|
|
Substandard
|
|
29
|
|
224
|
|
−
|
|
−
|
|
−
|
|
253
|
|
|
Default
|
|
−
|
|
−
|
|
156
|
|
−
|
|
−
|
|
156
|
|
|
IRB Approach
|
|
37,073
|
|
5,059
|
|
156
|
|
−
|
|
−
|
|
42,288
|
|
|
Standardized Approach
|
|
3,713
|
|
79
|
|
71
|
|
207
|
|
−
|
|
4,070
|
|
|
Gross carrying amount
|
|
40,786
|
|
5,138
|
|
227
|
|
207
|
|
−
|
|
46,358
|
|
|
Allowances for credit
losses(2)
|
|
91
|
|
108
|
|
87
|
|
(15)
|
|
−
|
|
271
|
|
|
Carrying amount
|
|
40,695
|
|
5,030
|
|
140
|
|
222
|
|
−
|
|
46,087
|
|
|
Credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excellent
|
|
641
|
|
−
|
|
−
|
|
−
|
|
−
|
|
641
|
|
|
Good
|
|
380
|
|
1
|
|
−
|
|
−
|
|
−
|
|
381
|
|
|
Satisfactory
|
|
752
|
|
68
|
|
−
|
|
−
|
|
−
|
|
820
|
|
|
Special mention
|
|
304
|
|
210
|
|
−
|
|
−
|
|
−
|
|
514
|
|
|
Substandard
|
|
37
|
|
86
|
|
−
|
|
−
|
|
−
|
|
123
|
|
|
Default
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
IRB Approach
|
|
2,114
|
|
365
|
|
−
|
|
−
|
|
−
|
|
2,479
|
|
|
Standardized Approach
|
|
124
|
|
−
|
|
−
|
|
−
|
|
−
|
|
124
|
|
|
Gross carrying amount
|
|
2,238
|
|
365
|
|
−
|
|
−
|
|
−
|
|
2,603
|
|
|
Allowances for credit
losses(2)
|
|
33
|
|
106
|
|
−
|
|
−
|
|
−
|
|
139
|
|
|
Carrying amount
|
|
2,205
|
|
259
|
|
−
|
|
−
|
|
−
|
|
2,464
|
|
|
Business and government(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excellent
|
|
7,785
|
|
−
|
|
−
|
|
−
|
|
1,113
|
|
8,898
|
|
|
Good
|
|
28,525
|
|
16
|
|
−
|
|
−
|
|
53
|
|
28,594
|
|
|
Satisfactory
|
|
32,095
|
|
8,400
|
|
−
|
|
2
|
|
140
|
|
40,637
|
|
|
Special mention
|
|
215
|
|
1,790
|
|
−
|
|
−
|
|
−
|
|
2,005
|
|
|
Substandard
|
|
27
|
|
290
|
|
−
|
|
−
|
|
−
|
|
317
|
|
|
Default
|
|
−
|
|
−
|
|
397
|
|
−
|
|
−
|
|
397
|
|
|
IRB Approach
|
|
68,647
|
|
10,496
|
|
397
|
|
2
|
|
1,306
|
|
80,848
|
|
|
Standardized Approach
|
|
9,774
|
|
57
|
|
47
|
|
47
|
|
46
|
|
9,971
|
|
|
Gross carrying amount
|
|
78,421
|
|
10,553
|
|
444
|
|
49
|
|
1,352
|
|
90,819
|
|
|
Allowances for credit
losses(2)
|
|
182
|
|
194
|
|
244
|
|
−
|
|
−
|
|
620
|
|
|
Carrying amount
|
|
78,239
|
|
10,359
|
|
200
|
|
49
|
|
1,352
|
|
90,199
|
|
|
Total loans and acceptances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
|
190,242
|
|
21,677
|
|
1,024
|
|
560
|
|
13,124
|
|
226,627
|
|
|
Allowances for credit
losses(2)
|
|
375
|
|
501
|
|
418
|
|
(110)
|
|
−
|
|
1,184
|
|
|
Carrying amount
|
|
189,867
|
|
21,176
|
|
606
|
|
670
|
|
13,124
|
|
225,443
|
|
(1) Not subject to expected credit losses.
(2) The allowances for credit losses do not include the amounts
related to undrawn commitments reported under Other liabilities in the Consolidated
Balance Sheet.
(3) Includes customers' liability under acceptances.
The following table presents the credit risk
exposures of off-balance-sheet commitments as at October 31,
2024 and 2023 according to credit quality and ECL impairment
stage.
|
As at October 31
|
|
|
2024
|
|
|
|
2023
|
|
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
Total
|
|
Stage
1
|
|
Stage
2
|
|
Stage
3
|
|
Total
|
|
|
Off-balance-sheet commitments(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excellent
|
16,159
|
|
113
|
|
−
|
|
16,272
|
|
16,648
|
|
67
|
|
−
|
|
16,715
|
|
|
Good
|
3,492
|
|
415
|
|
−
|
|
3,907
|
|
3,485
|
|
467
|
|
−
|
|
3,952
|
|
|
Satisfactory
|
1,095
|
|
249
|
|
−
|
|
1,344
|
|
1,268
|
|
285
|
|
−
|
|
1,553
|
|
|
Special mention
|
381
|
|
112
|
|
−
|
|
493
|
|
239
|
|
93
|
|
−
|
|
332
|
|
|
Substandard
|
30
|
|
35
|
|
−
|
|
65
|
|
17
|
|
15
|
|
−
|
|
32
|
|
|
Default
|
−
|
|
−
|
|
1
|
|
1
|
|
−
|
|
−
|
|
2
|
|
2
|
|
|
Non-retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excellent
|
13,071
|
|
−
|
|
−
|
|
13,071
|
|
14,117
|
|
−
|
|
−
|
|
14,117
|
|
|
Good
|
22,547
|
|
−
|
|
−
|
|
22,547
|
|
21,082
|
|
−
|
|
−
|
|
21,082
|
|
|
Satisfactory
|
15,513
|
|
6,351
|
|
−
|
|
21,864
|
|
12,258
|
|
4,354
|
|
−
|
|
16,612
|
|
|
Special mention
|
24
|
|
278
|
|
−
|
|
302
|
|
17
|
|
248
|
|
−
|
|
265
|
|
|
Substandard
|
2
|
|
52
|
|
−
|
|
54
|
|
19
|
|
33
|
|
−
|
|
52
|
|
|
Default
|
−
|
|
−
|
|
27
|
|
27
|
|
−
|
|
−
|
|
10
|
|
10
|
|
|
IRB Approach
|
72,314
|
|
7,605
|
|
28
|
|
79,947
|
|
69,150
|
|
5,562
|
|
12
|
|
74,724
|
|
|
Standardized Approach
|
18,968
|
|
−
|
|
−
|
|
18,968
|
|
18,172
|
|
−
|
|
−
|
|
18,172
|
|
|
Total exposure
|
91,282
|
|
7,605
|
|
28
|
|
98,915
|
|
87,322
|
|
5,562
|
|
12
|
|
92,896
|
|
|
Allowances for credit
losses
|
142
|
|
72
|
|
−
|
|
214
|
|
116
|
|
60
|
|
−
|
|
176
|
|
|
Total exposure, net of allowances
|
91,140
|
|
7,533
|
|
28
|
|
98,701
|
|
87,206
|
|
5,502
|
|
12
|
|
92,720
|
|
(1) Represent letters of guarantee and documentary letters of
credit, undrawn commitments, and backstop liquidity and credit
enhancement facilities.
Loans Past Due But Not
Impaired(1)
|
As at October 31
|
|
2024
|
|
|
|
|
|
2023
|
|
|
|
|
Residential
mortgage
|
|
Personal
|
|
Credit
card
|
|
Business
and
government
|
|
Residential
mortgage
|
|
Personal
|
|
Credit
card
|
|
Business
and
government(2)
|
|
Past due but not
impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 to 60 days
|
|
179
|
|
121
|
|
30
|
|
76
|
|
139
|
|
102
|
|
27
|
|
38
|
|
|
61 to 90 days
|
|
82
|
|
48
|
|
14
|
|
33
|
|
58
|
|
65
|
|
14
|
|
21
|
|
|
Over 90
days(3)
|
|
−
|
|
−
|
|
35
|
|
−
|
|
−
|
|
−
|
|
30
|
|
−
|
|
|
|
261
|
|
169
|
|
79
|
|
109
|
|
197
|
|
167
|
|
71
|
|
59
|
(1) Loans less than 31 days past due are not presented as they
are not considered past due from an administrative
standpoint.
(2) Includes customers' liability under acceptances.
(3) All loans more than 90 days past due, except for credit card
receivables, are considered impaired (Stage 3).
Note 8 - Loans and Allowances for
Credit Losses (cont.)
Impaired Loans
|
As at October 31
|
|
|
2024
|
|
2023
|
|
|
|
|
Gross
|
|
Allowances for credit
losses
|
|
Net
|
|
Gross
|
|
Allowances for credit losses
|
|
Net
|
|
|
Loans - Stage 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
612
|
|
137
|
|
475
|
|
353
|
|
87
|
|
266
|
|
|
|
Personal
|
327
|
|
146
|
|
181
|
|
227
|
|
87
|
|
140
|
|
|
|
Credit
card(1)
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
|
Business and
government(2)
|
713
|
|
225
|
|
488
|
|
444
|
|
244
|
|
200
|
|
|
|
|
1,652
|
|
508
|
|
1,144
|
|
1,024
|
|
418
|
|
606
|
|
|
Loans - POCI
|
391
|
|
(94)
|
|
485
|
|
560
|
|
(110)
|
|
670
|
|
|
|
2,043
|
|
414
|
|
1,629
|
|
1,584
|
|
308
|
|
1,276
|
|
(1) Credit card receivables are considered impaired, at the
latest, when payment is 180 days past due, and they are written off
at that time.
(2) Includes customers' liability under acceptances.
Maximum Exposure to Credit Risk of Impaired
Loans
The following table presents the maximum
exposure to credit risk of impaired loans, the percentage of
exposure covered by guarantees, and the main types of collateral
and guarantees held for each loan category.
|
As at October 31
|
|
|
|
2024
|
|
|
|
2023
|
|
|
|
|
|
|
|
Gross
impaired
loans
|
|
Percentage covered by
guarantees(1)
|
|
Gross
impaired
loans
|
|
Percentage covered by
guarantees(1)
|
|
Types of
collateral
and
guarantees
|
|
|
Loans - Stage 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
612
|
|
95 %
|
|
353
|
|
97
%
|
|
Residential buildings
|
|
|
|
Personal
|
|
327
|
|
52 %
|
|
227
|
|
59
%
|
|
Buildings, land and automobiles
|
|
|
|
Business and
government(2)
|
|
713
|
|
75 %
|
|
444
|
|
51
%
|
|
Buildings, land, equipment,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
government and bank guarantees
|
|
|
Loans - POCI
|
|
391
|
|
41 %
|
|
560
|
|
36
%
|
|
Buildings and automobiles
|
|
(1) For gross impaired
loans, the ratio is calculated on a weighted average basis using
the estimated value of the collateral and guarantees held for each
loan category presented. The value of the collateral and guarantees
held for a specific loan may exceed the balance of the loan; when
this is the case, the ratio presented is capped at 100%.
(2) Includes customers'
liability under acceptances.
Allowances for Credit Losses
The following tables present a reconciliation
of the allowances for credit losses by Consolidated Balance Sheet
item and by type of off-balance-sheet commitment.
|
|
|
|
|
|
|
|
|
|
|
Year ended October 31,
2024
|
|
|
|
|
Allowances
for
credit losses as
at
October 31,
2023
|
|
Provisions
for
credit
losses
|
|
Write-offs(1)
|
|
Disposals
|
|
Recoveries
and other
|
|
Allowances
for
credit losses
as
at October 31,
2024
|
|
|
Balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and deposits with financial
institutions(2)(3)
|
10
|
|
(1)
|
|
−
|
|
−
|
|
−
|
|
9
|
|
|
Securities(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At fair value through other
comprehensive income(4)
|
3
|
|
−
|
|
−
|
|
−
|
|
−
|
|
3
|
|
|
|
At amortized
cost(2)
|
4
|
|
2
|
|
−
|
|
−
|
|
−
|
|
6
|
|
|
Securities purchased under reverse
repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agreements and securities
borrowed(2)(3)
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Loans(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
154
|
|
46
|
|
(4)
|
|
(2)
|
|
3
|
|
197
|
|
|
|
Personal
|
271
|
|
198
|
|
(121)
|
|
−
|
|
12
|
|
360
|
|
|
|
Credit card
|
139
|
|
113
|
|
(111)
|
|
−
|
|
15
|
|
156
|
|
|
|
Business and government
|
567
|
|
226
|
|
(185)
|
|
−
|
|
20
|
|
628
|
|
|
|
Customers' liability under
acceptances
|
53
|
|
(53)
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
|
|
1,184
|
|
530
|
|
(421)
|
|
(2)
|
|
50
|
|
1,341
|
|
|
Other assets(2)(3)
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Off-balance-sheet commitments(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Letters of guarantee and
documentary letters of credit
|
16
|
|
5
|
|
−
|
|
−
|
|
−
|
|
21
|
|
|
Undrawn commitments
|
152
|
|
36
|
|
−
|
|
−
|
|
−
|
|
188
|
|
|
Backstop liquidity and credit
enhancement facilities
|
8
|
|
(3)
|
|
−
|
|
−
|
|
−
|
|
5
|
|
|
|
|
176
|
|
38
|
|
−
|
|
−
|
|
−
|
|
214
|
|
|
|
1,377
|
|
569
|
|
(421)
|
|
(2)
|
|
50
|
|
1,573
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended October 31, 2023
|
|
|
|
|
Allowances for
credit
losses as at
October
31, 2022
|
|
Provisions for
credit
losses
|
|
Write-offs(1)
|
|
Disposals
|
|
Recoveries
and
other
|
|
Allowances for
credit
losses as
at
October 31, 2023
|
|
|
Balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and deposits with financial
institutions(2)(3)
|
5
|
|
5
|
|
−
|
|
−
|
|
−
|
|
10
|
|
|
Securities(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At fair value through other
comprehensive income(4)
|
2
|
|
1
|
|
−
|
|
−
|
|
−
|
|
3
|
|
|
|
At amortized
cost(2)
|
7
|
|
(3)
|
|
−
|
|
−
|
|
−
|
|
4
|
|
|
Securities purchased under reverse
repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agreements and securities
borrowed(2)(3)
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Loans(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
118
|
|
36
|
|
(3)
|
|
−
|
|
3
|
|
154
|
|
|
|
Personal
|
239
|
|
114
|
|
(101)
|
|
−
|
|
19
|
|
271
|
|
|
|
Credit card
|
126
|
|
81
|
|
(83)
|
|
−
|
|
15
|
|
139
|
|
|
|
Business and government
|
418
|
|
150
|
|
(12)
|
|
−
|
|
11
|
|
567
|
|
|
|
Customers' liability under
acceptances
|
54
|
|
(1)
|
|
−
|
|
−
|
|
−
|
|
53
|
|
|
|
|
955
|
|
380
|
|
(199)
|
|
−
|
|
48
|
|
1,184
|
|
|
Other assets(2)(3)
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Off-balance-sheet commitments(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Letters of guarantee and
documentary letters of credit
|
13
|
|
3
|
|
−
|
|
−
|
|
−
|
|
16
|
|
|
Undrawn commitments
|
143
|
|
9
|
|
−
|
|
−
|
|
−
|
|
152
|
|
|
Backstop liquidity and credit
enhancement facilities
|
6
|
|
2
|
|
−
|
|
−
|
|
−
|
|
8
|
|
|
|
|
162
|
|
14
|
|
−
|
|
−
|
|
−
|
|
176
|
|
|
|
1,131
|
|
397
|
|
(199)
|
|
−
|
|
48
|
|
1,377
|
|
(1) The contractual amount outstanding on financial assets that
were written off during the year ended October 31, 2024 and
that are still subject to enforcement activity was
$172 million ($118 million for the year ended
October 31, 2023).
(2) These financial assets are presented net of the allowances
for credit losses in the Consolidated Balance Sheet.
(3) As at October 31, 2024 and 2023, these financial assets
were mainly classified in Stage 1 and their credit quality fell
mostly within the Excellent category.
(4) The allowances for credit losses are reported under
Accumulated other comprehensive
income in the Consolidated Balance Sheet.
(5) The allowances for credit losses are reported under
Allowances for credit
losses in the Consolidated Balance Sheet.
(6) The allowances for credit losses are reported under
Other liabilities in the
Consolidated Balance Sheet.
Note 8 - Loans and Allowances for
Credit Losses (cont.)
The following tables present the
reconciliation of allowances for credit losses for each loan
category at amortized cost according to ECL impairment
stage.
|
Year ended October 31
|
|
|
|
|
2024
|
|
|
|
|
|
2023
|
|
|
|
|
|
Allowances
for
credit losses
on
non-impaired
loans
|
|
Allowances
for
credit losses
on
impaired
loans
|
|
Total
|
|
Allowances for
credit
losses on
non-impaired loans
|
|
Allowances for
credit
losses on
impaired
loans
|
|
Total
|
|
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI(1)
|
|
|
Stage
1
|
|
Stage
2
|
|
Stage
3
|
|
POCI(1)
|
|
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning
|
69
|
|
93
|
|
87
|
|
(95)
|
|
154
|
|
53
|
|
80
|
|
61
|
|
(76)
|
|
118
|
|
|
|
Originations or purchases
|
13
|
|
−
|
|
−
|
|
−
|
|
13
|
|
18
|
|
−
|
|
−
|
|
−
|
|
18
|
|
|
|
Transfers(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Stage 1
|
58
|
|
(50)
|
|
(8)
|
|
−
|
|
−
|
|
52
|
|
(48)
|
|
(4)
|
|
−
|
|
−
|
|
|
|
|
to Stage 2
|
(9)
|
|
28
|
|
(19)
|
|
−
|
|
−
|
|
(12)
|
|
30
|
|
(18)
|
|
−
|
|
−
|
|
|
|
|
to Stage 3
|
(1)
|
|
(26)
|
|
27
|
|
−
|
|
−
|
|
(2)
|
|
(33)
|
|
35
|
|
−
|
|
−
|
|
|
|
Net remeasurement of loss
allowances(3)
|
(57)
|
|
59
|
|
54
|
|
8
|
|
64
|
|
(29)
|
|
65
|
|
21
|
|
(17)
|
|
40
|
|
|
|
Derecognitions(4)
|
(7)
|
|
(7)
|
|
(11)
|
|
−
|
|
(25)
|
|
(7)
|
|
(9)
|
|
(8)
|
|
−
|
|
(24)
|
|
|
|
Changes to models
|
(2)
|
|
(12)
|
|
8
|
|
−
|
|
(6)
|
|
(5)
|
|
7
|
|
−
|
|
−
|
|
2
|
|
|
Provisions for credit
losses
|
(5)
|
|
(8)
|
|
51
|
|
8
|
|
46
|
|
15
|
|
12
|
|
26
|
|
(17)
|
|
36
|
|
|
Write-offs
|
−
|
|
−
|
|
(4)
|
|
−
|
|
(4)
|
|
−
|
|
−
|
|
(3)
|
|
−
|
|
(3)
|
|
|
Disposals
|
(2)
|
|
−
|
|
−
|
|
−
|
|
(2)
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Recoveries
|
−
|
|
−
|
|
3
|
|
−
|
|
3
|
|
−
|
|
−
|
|
2
|
|
−
|
|
2
|
|
|
Foreign exchange movements and
other
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
1
|
|
1
|
|
1
|
|
(2)
|
|
1
|
|
|
Balance at end
|
62
|
|
85
|
|
137
|
|
(87)
|
|
197
|
|
69
|
|
93
|
|
87
|
|
(95)
|
|
154
|
|
|
Includes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts drawn
|
62
|
|
85
|
|
137
|
|
(87)
|
|
197
|
|
69
|
|
93
|
|
87
|
|
(95)
|
|
154
|
|
|
|
Undrawn
commitments(5)
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Personal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning
|
95
|
|
114
|
|
87
|
|
(15)
|
|
281
|
|
70
|
|
117
|
|
75
|
|
(16)
|
|
246
|
|
|
|
Originations or purchases
|
36
|
|
−
|
|
−
|
|
−
|
|
36
|
|
47
|
|
−
|
|
−
|
|
−
|
|
47
|
|
|
|
Transfers(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Stage 1
|
106
|
|
(96)
|
|
(10)
|
|
−
|
|
−
|
|
91
|
|
(82)
|
|
(9)
|
|
−
|
|
−
|
|
|
|
|
to Stage 2
|
(26)
|
|
33
|
|
(7)
|
|
−
|
|
−
|
|
(25)
|
|
30
|
|
(5)
|
|
−
|
|
−
|
|
|
|
|
to Stage 3
|
(1)
|
|
(74)
|
|
75
|
|
−
|
|
−
|
|
(2)
|
|
(88)
|
|
90
|
|
−
|
|
−
|
|
|
|
Net remeasurement of loss
allowances(3)
|
(94)
|
|
165
|
|
113
|
|
4
|
|
188
|
|
(77)
|
|
152
|
|
23
|
|
1
|
|
99
|
|
|
|
Derecognitions(4)
|
(10)
|
|
(14)
|
|
(5)
|
|
−
|
|
(29)
|
|
(11)
|
|
(18)
|
|
(4)
|
|
−
|
|
(33)
|
|
|
|
Changes to models
|
−
|
|
(1)
|
|
3
|
|
−
|
|
2
|
|
1
|
|
3
|
|
−
|
|
−
|
|
4
|
|
|
Provisions for credit
losses
|
11
|
|
13
|
|
169
|
|
4
|
|
197
|
|
24
|
|
(3)
|
|
95
|
|
1
|
|
117
|
|
|
Write-offs
|
−
|
|
−
|
|
(121)
|
|
−
|
|
(121)
|
|
−
|
|
−
|
|
(101)
|
|
−
|
|
(101)
|
|
|
Disposals
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Recoveries
|
−
|
|
−
|
|
15
|
|
−
|
|
15
|
|
−
|
|
−
|
|
20
|
|
−
|
|
20
|
|
|
Foreign exchange movements and
other
|
1
|
|
−
|
|
(4)
|
|
−
|
|
(3)
|
|
1
|
|
−
|
|
(2)
|
|
−
|
|
(1)
|
|
|
Balance at end
|
107
|
|
127
|
|
146
|
|
(11)
|
|
369
|
|
95
|
|
114
|
|
87
|
|
(15)
|
|
281
|
|
|
Includes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts drawn
|
102
|
|
123
|
|
146
|
|
(11)
|
|
360
|
|
91
|
|
108
|
|
87
|
|
(15)
|
|
271
|
|
|
|
Undrawn
commitments(5)
|
5
|
|
4
|
|
−
|
|
−
|
|
9
|
|
4
|
|
6
|
|
−
|
|
−
|
|
10
|
|
(1) No POCI loans were acquired during the year ended October 31, 2024 (the total amount of
undiscounted initially expected credit losses on the POCI loans
acquired during the year ended on October 31, 2023 was
$93 million). The expected credit losses reflected in the
purchase price have been discounted.
(2) Represent stage
transfers deemed to have taken place at the beginning of the
quarter in which the transfer occurred.
(3) Includes the net
remeasurement of loss allowances (after transfers) attributable
mainly to changes in volumes and in the credit quality of existing
loans as well as to changes in risk parameters.
(4) Represent reversals
to loss allowances arising from full loan repayments (excluding
write-offs and disposals).
(5) The allowances for
credit losses on undrawn commitments are reported under
Other liabilities in the
Consolidated Balance Sheet.
|
Year ended October 31
|
|
|
|
|
2024
|
|
|
|
|
|
2023
|
|
|
|
|
|
Allowances
for
credit losses
on
non-impaired
loans
|
|
Allowances
for
credit losses
on
impaired
loans
|
|
Total
|
|
Allowances for
credit
losses on
non-impaired loans
|
|
Allowances for
credit
losses on
impaired
loans
|
|
Total
|
|
|
|
Stage 1
|
|
Stage 2
|
|
Stage 3
|
|
POCI(1)
|
|
Stage
1
|
|
Stage
2
|
|
Stage
3
|
|
POCI(1)
|
|
|
Credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning
|
59
|
|
127
|
|
−
|
|
−
|
|
186
|
|
53
|
|
112
|
|
−
|
|
−
|
|
165
|
|
|
|
Originations or
purchases
|
12
|
|
−
|
|
−
|
|
−
|
|
12
|
|
11
|
|
−
|
|
−
|
|
−
|
|
11
|
|
|
|
Transfers(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Stage 1
|
110
|
|
(110)
|
|
−
|
|
−
|
|
−
|
|
100
|
|
(100)
|
|
−
|
|
−
|
|
−
|
|
|
|
|
to Stage 2
|
(20)
|
|
20
|
|
−
|
|
−
|
|
−
|
|
(19)
|
|
19
|
|
−
|
|
−
|
|
−
|
|
|
|
|
to Stage 3
|
(1)
|
|
(46)
|
|
47
|
|
−
|
|
−
|
|
−
|
|
(35)
|
|
35
|
|
−
|
|
−
|
|
|
|
Net remeasurement of loss
allowances(3)
|
(90)
|
|
147
|
|
49
|
|
−
|
|
106
|
|
(83)
|
|
133
|
|
33
|
|
−
|
|
83
|
|
|
|
Derecognitions(4)
|
(2)
|
|
(1)
|
|
−
|
|
−
|
|
(3)
|
|
(3)
|
|
(2)
|
|
−
|
|
−
|
|
(5)
|
|
|
|
Changes to models
|
2
|
|
4
|
|
−
|
|
−
|
|
6
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Provisions for credit
losses
|
11
|
|
14
|
|
96
|
|
−
|
|
121
|
|
6
|
|
15
|
|
68
|
|
−
|
|
89
|
|
|
Write-offs
|
−
|
|
−
|
|
(111)
|
|
−
|
|
(111)
|
|
−
|
|
−
|
|
(83)
|
|
−
|
|
(83)
|
|
|
Disposals
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Recoveries
|
−
|
|
−
|
|
15
|
|
−
|
|
15
|
|
−
|
|
−
|
|
15
|
|
−
|
|
15
|
|
|
Foreign exchange movements and
other
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Balance at end
|
70
|
|
141
|
|
−
|
|
−
|
|
211
|
|
59
|
|
127
|
|
−
|
|
−
|
|
186
|
|
|
Includes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts drawn
|
42
|
|
114
|
|
−
|
|
−
|
|
156
|
|
33
|
|
106
|
|
−
|
|
−
|
|
139
|
|
|
|
Undrawn
commitments(5)
|
28
|
|
27
|
|
−
|
|
−
|
|
55
|
|
26
|
|
21
|
|
−
|
|
−
|
|
47
|
|
|
Business and government(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning
|
251
|
|
220
|
|
244
|
|
−
|
|
715
|
|
177
|
|
195
|
|
197
|
|
−
|
|
569
|
|
|
|
Originations or
purchases
|
135
|
|
−
|
|
−
|
|
−
|
|
135
|
|
93
|
|
−
|
|
−
|
|
−
|
|
93
|
|
|
|
Transfers(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Stage 1
|
54
|
|
(52)
|
|
(2)
|
|
−
|
|
−
|
|
54
|
|
(54)
|
|
−
|
|
−
|
|
−
|
|
|
|
|
to Stage 2
|
(52)
|
|
60
|
|
(8)
|
|
−
|
|
−
|
|
(28)
|
|
36
|
|
(8)
|
|
−
|
|
−
|
|
|
|
|
to Stage 3
|
(1)
|
|
(10)
|
|
11
|
|
−
|
|
−
|
|
(1)
|
|
(6)
|
|
7
|
|
−
|
|
−
|
|
|
|
Net remeasurement of loss
allowances(3)
|
(39)
|
|
28
|
|
168
|
|
(14)
|
|
143
|
|
(24)
|
|
79
|
|
61
|
|
(7)
|
|
109
|
|
|
|
Derecognitions(4)
|
(40)
|
|
(26)
|
|
(6)
|
|
−
|
|
(72)
|
|
(19)
|
|
(29)
|
|
(4)
|
|
−
|
|
(52)
|
|
|
|
Changes to models
|
−
|
|
(5)
|
|
1
|
|
−
|
|
(4)
|
|
(2)
|
|
(1)
|
|
−
|
|
−
|
|
(3)
|
|
|
Provisions for credit
losses
|
57
|
|
(5)
|
|
164
|
|
(14)
|
|
202
|
|
73
|
|
25
|
|
56
|
|
(7)
|
|
147
|
|
|
Write-offs
|
−
|
|
−
|
|
(185)
|
|
−
|
|
(185)
|
|
−
|
|
−
|
|
(12)
|
|
−
|
|
(12)
|
|
|
Disposals
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
Recoveries
|
−
|
|
−
|
|
5
|
|
18
|
|
23
|
|
−
|
|
−
|
|
3
|
|
7
|
|
10
|
|
|
Foreign exchange movements and
other
|
−
|
|
−
|
|
(3)
|
|
−
|
|
(3)
|
|
1
|
|
−
|
|
−
|
|
−
|
|
1
|
|
|
Balance at end
|
308
|
|
215
|
|
225
|
|
4
|
|
752
|
|
251
|
|
220
|
|
244
|
|
−
|
|
715
|
|
|
Includes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts drawn
|
218
|
|
181
|
|
225
|
|
4
|
|
628
|
|
182
|
|
194
|
|
244
|
|
−
|
|
620
|
|
|
|
Undrawn
commitments(5)
|
90
|
|
34
|
|
−
|
|
−
|
|
124
|
|
69
|
|
26
|
|
−
|
|
−
|
|
95
|
|
|
Total allowances for credit losses at
end(7)
|
547
|
|
568
|
|
508
|
|
(94)
|
|
1,529
|
|
474
|
|
554
|
|
418
|
|
(110)
|
|
1,336
|
|
|
Includes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts drawn
|
424
|
|
503
|
|
508
|
|
(94)
|
|
1,341
|
|
375
|
|
501
|
|
418
|
|
(110)
|
|
1,184
|
|
|
|
Undrawn
commitments(5)
|
123
|
|
65
|
|
−
|
|
−
|
|
188
|
|
99
|
|
53
|
|
−
|
|
−
|
|
152
|
|
(1) No POCI loans were acquired during the year ended October 31, 2024 (the total amount of
undiscounted initially expected credit losses on the POCI loans
acquired during the year ended on October 31, 2023 was
$93 million). The expected credit losses reflected in the
purchase price have been discounted.
(2) Represent stage
transfers deemed to have taken place at the beginning of the
quarter in which the transfer occurred.
(3) Includes the net remeasurement of loss allowances (after
transfers) attributable mainly to changes in volumes and in the
credit quality of existing loans as well as to changes in risk
parameters.
(4) Represent reversals to loss allowances arising from full loan
repayments (excluding write-offs and disposals).
(5) The allowances for credit losses on undrawn commitments are
reported under Other
liabilities in the Consolidated Balance Sheet.
(6) Includes customers' liability under acceptances.
(7) Excludes allowances for credit losses on other financial
assets at amortized cost and on off-balance-sheet commitments other
than undrawn commitments.
Note 8 - Loans and Allowances for
Credit Losses (cont.)
Distribution of Gross and Impaired Loans by Borrower
Category
Under the Basel Asset Classes
|
|
|
|
|
|
|
|
|
|
|
|
2024
|
|
|
|
|
|
|
|
|
|
2023
|
|
|
|
|
|
As at October
31
|
|
Year ended October
31
|
|
As at
October 31
|
|
Year
ended October 31
|
|
|
|
|
|
Gross
loans
|
|
Impaired
loans
|
|
Allowances
for credit
losses
on
impaired
loans(1)
|
|
Provisions
for credit
losses
|
|
Write-offs
|
|
Gross
loans(2)
|
|
Impaired
loans(2)
|
|
Allowances
for
credit losses
on
impaired
loans(1)(2)
|
|
Provisions
for
credit
losses
|
|
Write-offs
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgage(3)
|
104,665
|
|
647
|
|
138
|
|
47
|
|
3
|
|
99,910
|
|
405
|
|
91
|
|
28
|
|
2
|
|
|
|
Qualifying revolving
retail(4)
|
4,148
|
|
27
|
|
21
|
|
115
|
|
130
|
|
4,000
|
|
24
|
|
18
|
|
82
|
|
96
|
|
|
|
Other
retail(5)
|
17,919
|
|
336
|
|
140
|
|
167
|
|
103
|
|
16,696
|
|
157
|
|
67
|
|
81
|
|
88
|
|
|
|
|
|
126,732
|
|
1,010
|
|
299
|
|
329
|
|
236
|
|
120,606
|
|
586
|
|
176
|
|
191
|
|
186
|
|
|
Non-retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
9,192
|
|
84
|
|
16
|
|
12
|
|
−
|
|
8,545
|
|
67
|
|
4
|
|
2
|
|
−
|
|
|
|
Oil and gas
|
1,913
|
|
−
|
|
−
|
|
−
|
|
−
|
|
1,826
|
|
−
|
|
−
|
|
(7)
|
|
−
|
|
|
|
Mining
|
2,062
|
|
38
|
|
17
|
|
17
|
|
−
|
|
1,245
|
|
−
|
|
−
|
|
(4)
|
|
−
|
|
|
|
Utilities
|
12,528
|
|
−
|
|
−
|
|
−
|
|
−
|
|
12,427
|
|
−
|
|
−
|
|
(35)
|
|
−
|
|
|
|
Non-real-estate
construction(6)
|
1,864
|
|
38
|
|
31
|
|
−
|
|
−
|
|
1,739
|
|
38
|
|
31
|
|
−
|
|
−
|
|
|
|
Manufacturing
|
8,064
|
|
93
|
|
45
|
|
32
|
|
37
|
|
7,047
|
|
76
|
|
51
|
|
41
|
|
−
|
|
|
|
Wholesale
|
3,145
|
|
48
|
|
17
|
|
42
|
|
64
|
|
3,208
|
|
51
|
|
40
|
|
15
|
|
−
|
|
|
|
Retail
|
4,229
|
|
13
|
|
6
|
|
−
|
|
13
|
|
3,801
|
|
29
|
|
18
|
|
(1)
|
|
−
|
|
|
|
Transportation
|
3,253
|
|
71
|
|
6
|
|
4
|
|
7
|
|
2,631
|
|
14
|
|
9
|
|
3
|
|
1
|
|
|
|
Communications
|
2,542
|
|
7
|
|
6
|
|
1
|
|
9
|
|
2,556
|
|
17
|
|
14
|
|
5
|
|
2
|
|
|
|
Financial services
|
12,775
|
|
66
|
|
16
|
|
11
|
|
−
|
|
11,693
|
|
22
|
|
5
|
|
6
|
|
2
|
|
|
|
Real estate services
and
real estate
construction(7)
|
30,848
|
|
113
|
|
26
|
|
23
|
|
2
|
|
25,967
|
|
19
|
|
5
|
|
−
|
|
3
|
|
|
|
Professional services
|
3,871
|
|
10
|
|
3
|
|
2
|
|
2
|
|
3,973
|
|
8
|
|
3
|
|
(1)
|
|
2
|
|
|
|
Education and health
care
|
3,487
|
|
49
|
|
13
|
|
6
|
|
50
|
|
3,700
|
|
83
|
|
55
|
|
31
|
|
1
|
|
|
|
Other services
|
7,356
|
|
11
|
|
7
|
|
1
|
|
1
|
|
6,898
|
|
13
|
|
7
|
|
−
|
|
2
|
|
|
|
Government
|
1,853
|
|
−
|
|
−
|
|
−
|
|
−
|
|
1,727
|
|
−
|
|
−
|
|
−
|
|
−
|
|
|
|
Other
|
8,268
|
|
1
|
|
−
|
|
−
|
|
−
|
|
6,478
|
|
1
|
|
−
|
|
(1)
|
|
−
|
|
|
|
|
|
117,250
|
|
642
|
|
209
|
|
151
|
|
185
|
|
105,461
|
|
438
|
|
242
|
|
54
|
|
13
|
|
|
Excluding POCI loans
|
243,982
|
|
1,652
|
|
508
|
|
480
|
|
421
|
|
226,067
|
|
1,024
|
|
418
|
|
245
|
|
199
|
|
|
POCI
|
391
|
|
391
|
|
(94)
|
|
(2)
|
|
−
|
|
560
|
|
560
|
|
(110)
|
|
(23)
|
|
−
|
|
|
|
|
|
244,373
|
|
2,043
|
|
414
|
|
478
|
|
421
|
|
226,627
|
|
1,584
|
|
308
|
|
222
|
|
199
|
|
|
Stages 1 and 2(8)
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
569
|
|
421
|
|
|
|
|
|
|
|
397
|
|
199
|
|
(1) Allowances for credit
losses on drawn amounts.
(2) Includes customers'
liability under acceptances.
(3) Includes residential
mortgages on one-to-four-unit dwellings (Basel definition) and home
equity lines of credit.
(4) Includes lines of
credit and credit card receivables.
(5) Includes consumer
loans and other retail loans but excludes SME loans.
(6) Includes civil
engineering loans, public-private partnership loans, and project
finance loans.
(7) Includes residential
mortgages on dwellings of five or more units and SME
loans.
(8) Includes provisions
for credit losses on other financial assets at amortized cost and
on off-balance-sheet commitments.
Main Macroeconomic Factors
The following tables show the main
macroeconomic factors used to estimate the allowances for credit
losses on loans. For each scenario, namely, the base scenario,
upside scenario, and downside scenario, the average values of the
macroeconomic factors over the next 12 months (used for Stage 1
credit loss calculations) and over the remaining forecast period
(used for Stage 2 credit loss calculations) are
presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at October 31,
2024
|
|
|
|
|
|
Base
scenario
|
|
Upside
scenario
|
|
Downside
scenario
|
|
|
|
|
|
Next
12 months
|
|
|
Remaining
forecast
period
|
|
Next
12 months
|
|
|
Remaining
forecast
period
|
|
Next
12 months
|
|
|
Remaining
forecast
period
|
|
|
Macroeconomic factors(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDP
growth(2)
|
|
1.2
|
%
|
|
2.0
|
%
|
|
1.9
|
%
|
|
2.1
|
%
|
|
(5.2)
|
%
|
|
2.7
|
%
|
|
|
|
Unemployment rate
|
|
7.3
|
%
|
|
6.7
|
%
|
|
6.5
|
%
|
|
5.8
|
%
|
|
8.7
|
%
|
|
7.9
|
%
|
|
|
|
Housing price index
growth(2)
|
|
4.1
|
%
|
|
2.6
|
%
|
|
7.7
|
%
|
|
2.4
|
%
|
|
(13.9)
|
%
|
|
0.3
|
%
|
|
|
|
BBB
spread(3)
|
|
2.2
|
%
|
|
1.9
|
%
|
|
1.7
|
%
|
|
1.6
|
%
|
|
3.4
|
%
|
|
2.6
|
%
|
|
|
|
S&P/TSX
growth(2)(4)
|
|
(3.8)
|
%
|
|
2.7
|
%
|
|
4.0
|
%
|
|
3.0
|
%
|
|
(25.6)
|
%
|
|
5.5
|
%
|
|
|
|
WTI oil price(5)
(US$ per
barrel)
|
|
71
|
|
|
75
|
|
|
89
|
|
|
84
|
|
|
45
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
July 31, 2024
|
|
|
|
|
|
Base
scenario
|
|
Upside
scenario
|
|
Downside
scenario
|
|
|
|
|
|
Next
12
months
|
|
|
Remaining
forecast
period
|
|
Next
12
months
|
|
|
Remaining
forecast
period
|
|
Next
12
months
|
|
|
Remaining
forecast
period
|
|
|
Macroeconomic factors(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDP
growth(2)
|
|
0.9
|
%
|
|
1.8
|
%
|
|
1.4
|
%
|
|
2.0
|
%
|
|
(5.1)
|
%
|
|
2.6
|
%
|
|
|
|
Unemployment rate
|
|
6.8
|
%
|
|
6.5
|
%
|
|
6.5
|
%
|
|
5.8
|
%
|
|
8.4
|
%
|
|
7.7
|
%
|
|
|
|
Housing price index
growth(2)
|
|
2.1
|
%
|
|
2.6
|
%
|
|
7.7
|
%
|
|
2.4
|
%
|
|
(13.9)
|
%
|
|
0.3
|
%
|
|
|
|
BBB
spread(3)
|
|
2.0
|
%
|
|
1.6
|
%
|
|
1.4
|
%
|
|
1.4
|
%
|
|
3.1
|
%
|
|
2.3
|
%
|
|
|
|
S&P/TSX
growth(2)(4)
|
|
(8.3)
|
%
|
|
2.9
|
%
|
|
4.0
|
%
|
|
3.0
|
%
|
|
(25.6)
|
%
|
|
5.5
|
%
|
|
|
|
WTI oil price(5)
(US$ per
barrel)
|
|
76
|
|
|
80
|
|
|
94
|
|
|
89
|
|
|
47
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
October 31, 2023
|
|
|
|
|
|
Base
scenario
|
|
Upside
scenario
|
|
Downside
scenario
|
|
|
|
|
|
Next
12
months
|
|
|
Remaining
forecast
period
|
|
Next
12
months
|
|
|
Remaining
forecast
period
|
|
Next
12
months
|
|
|
Remaining
forecast
period
|
|
|
Macroeconomic factors(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDP
growth(2)
|
|
−
|
%
|
|
1.7
|
%
|
|
0.4
|
%
|
|
1.9
|
%
|
|
(4.9)
|
%
|
|
2.6
|
%
|
|
|
|
Unemployment rate
|
|
6.3
|
%
|
|
6.5
|
%
|
|
5.9
|
%
|
|
5.9
|
%
|
|
7.7
|
%
|
|
7.2
|
%
|
|
|
|
Housing price index
growth(2)
|
|
(1.1)
|
%
|
|
1.9
|
%
|
|
2.5
|
%
|
|
2.4
|
%
|
|
(13.9)
|
%
|
|
0.3
|
%
|
|
|
|
BBB
spread(3)
|
|
2.4
|
%
|
|
2.1
|
%
|
|
1.9
|
%
|
|
1.8
|
%
|
|
3.1
|
%
|
|
2.3
|
%
|
|
|
|
S&P/TSX
growth(2)(4)
|
|
(10.0)
|
%
|
|
3.7
|
%
|
|
4.0
|
%
|
|
3.0
|
%
|
|
(25.6)
|
%
|
|
5.5
|
%
|
|
|
|
WTI oil price(5)
(US$ per
barrel)
|
|
77
|
|
|
80
|
|
|
91
|
|
|
86
|
|
|
46
|
|
|
56
|
|
|
(1) All macroeconomic factors are based on the Canadian economy
unless otherwise indicated.
(2) Growth rate is
annualized.
(3) Yield on corporate
BBB bonds less yield on Canadian federal government bonds with a
10-year maturity.
(4) Main stock index in
Canada.
(5) The West Texas
Intermediate (WTI) index is commonly used as a benchmark for the
price of oil.
The main macroeconomic
factors used for the personal
credit portfolio are
unemployment rate and growth in the
housing price index, based on the economy of Canada or
Quebec. The main macroeconomic factors
used for the business
and government credit portfolio are
unemployment rate, spread on corporate BBB bonds, S&P/TSX
growth, and WTI oil price.
An increase in unemployment rate or BBB spread
will generally lead to higher allowances for credit losses, whereas
an increase in the other macroeconomic factors (GDP, S&P/TSX,
housing price index, and WTI oil price) will generally lead to
lower allowances for credit losses.
Note 8 - Loans and Allowances for
Credit Losses (cont.)
During the year ended October 31, 2024,
the macroeconomic outlook remained essentially unchanged and
uncertainty remains high.
Data further confirm that inflation
is contained in Canada, in an environment where economic growth has
been below the pace of potential GDP since 2022. The labour market
remains fragile, with a continuous decline in the employment rate,
in particular for people aged 25 to 54. Hiring intentions and job
vacancy rates do not suggest any stabilization in the coming
months, as the business climate is weakened by a monetary policy
that remains restrictive. Considering that inflation is back to the
Bank of Canada's target, it seems risky to maintain such a policy
because this could have side effects. We anticipate an additional
225-basis point reduction in the policy interest rate over the next
four quarters, with economic growth of only 1.0% in 2024 and 1.3%
in 2025, which would lead to an unemployment rate ranging from 7.0%
to 7.5% by mid-2025. The U.S. economy continues to be robust as a
result of sustained government and consumer spending. However, the
labour market has started to show signs of vulnerability.
Consequently, the U.S. Federal Reserve began a monetary policy
easing cycle, but it is hard to believe that inflation will be
permanently curbed without any economic slowdown. In the base
scenario, the unemployment rate stands at 7.3% after 12 months in
Canada, up 0.8 percentage point. Despite the slight deterioration
in the labour market, real estate prices continue to increase
slightly due to the housing shortage exacerbated by the demographic
boom and the increase in maximum amortization for insured loans
from 25 to 30 years for first-time homebuyers. As a result, house
prices are up 4.1% year over year. The S&P/TSX sits at 22,067
points after one year, and the price of oil hovers around
US$73.
In the upside scenario, an easing
of geopolitical tensions boosts confidence. Inflation continues to
subside, as central banks managed to curb it without causing
significant damages to the economy. The Canadian and U.S.
governments continue to expand spending, offsetting the effects of
the restrictive monetary policies. With the labour market holding
up, consumer spending remains relatively resilient. House prices
rise at a moderate pace against a backdrop of strong demographic
growth. After one year, the unemployment rate in this scenario is
more favourable than in the base scenario (nine-tenths lower).
House prices rise 7.7%, the S&P/TSX is at 23,849 points after
one year, and the price of oil hovers around US$89.
In the downside scenario, central
banks did not ease their monetary policies quickly enough, and the
global economy sinks into a recession as falling demand translates
into reduced investment by businesses, which also lay off a large
number of workers. Given budgetary constraints, governments are
unable to support households and businesses as they did during the
pandemic. The geopolitical situation continues to cause concern,
with the risk of conflicts escalating. After 12 months, economic
contraction pushes unemployment to 9.5%. House prices fall sharply
(-13.9%). The S&P/TSX sits at 17,063 points after one
year, and the price of oil hovers around US$39.
Given uncertainty surrounding the key inputs
used to measure credit losses, the Bank has applied expert credit
judgment to adjust the modelled ECL results.