REG - Nat Bank of Canada - Annual Information Form 2024
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RNS Number : 8379O National Bank of Canada 04 December 2024
Regulatory Announcement
National Bank of Canada
December 4, 2024
2024 Annual Information Form
National Bank of Canada (the "Bank") announces publication of its 2024 Annual
Information Form. The 2024 Annual Information Form has been uploaded to the
National Storage Mechanism and will shortly be available at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) and is available on
the Bank's website at https://www.nbc.ca/about-us/investors.html
(https://www.nbc.ca/about-us/investors.html)
To view the full PDF of the 2024 Annual Information Form, please click on the
following link:
http://www.rns-pdf.londonstockexchange.com/rns/8379O_1-2024-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8379O_1-2024-12-4.pdf)
ANNUAL INFORMATION FORM
December 3, 2024
TABLE OF CONTENTS AND LIST OF INFORMATION INCORPORATED BY REFERENCE
Annual Information Form 2024 Annual Report
Abbreviations Used 3
Distribution Notice of this Annual Information Form 4
Explanatory Note 4
Caution Regarding Forward-Looking Statements 4
Corporate Structure 6
Name, Address and Incorporation 6
Bank Subsidiaries (Intercorporate Relationships) 6 Note 30 (pP. 229 AND 231)
General Development of the Business 6
Three-Year History 6 PP. 14 TO 200F 1 (#_ftn1)
Description of the Business 9
Business 9 pP. 21 TO 23 AND 28 TO 47
Products and Services 9 pP. 28 TO 47
Specialized Skills and Knowledge 9 pP. 20 TO 27, 29 TO 47 AND 53 TO 118
Competitive Conditions 9 pP. 23, 26 TO 52 AND 76 TO 77
New Products 9 pP. 28 TO 46
Intangible Assets 9 pP. 116, 156, 157 AND Note 12 (pP. 194 AND 195)
Environmental Protection 9 pP. 110 TO 112
Number of Employees 9 pP. C2, 21, 121 AND 242
Assets under Administration and Assets under Management 9 pP. C2, 21 AND 34 TO 37
Loans by Borrower Category pP. 23, 33, 51, table 9, p. 127 AND
Note 8 (pP. 179 TO 191)
Investment Policies and Lending and Investment Restrictions 9 pP. 55 TO 112, Note 22 (P. 211 AND 212) AND
NOTE 31 (P. 230 TO 234)
Provision for Credit Losses 10 pP. 32, 115, 116, table 11, pP. 129, 152, 153 AND Note 8 (pP. 179 TO 191)
Corporate Responsibility 10 pP. 110 TO 112
Risk Factors 10 pP. 65 TO 112, note 4 (pP. 164 TO 174),
Note 8 (pP. 179 TO 191), note 18 (pP. 199 TO 202) AND note 25 (pP. 217 TO
220)
Asset-Backed Securities Outstanding 10 pP. 50 TO 53, NOte 6 P. 177 AND
note 28 (pP. 224 TO 226)
Dividends 10 pP. 1, 2, 23, 60, 120, 121, 144,
note 20 (p. 207 TO 210) AND P. 242
Capital Structure 10 p. 61, Note 17 (P. 197) AND
NOTE 20 (pP. 207 TO 210)
Common Shares 10
First Preferred Shares 11
Automatic Conversion of Non-Viability Contingent Capital (NVCC) 13
Second Preferred Shares 13
Restrictions on Bank Shares under the Act 14
Subscription Receipts 14
Notes 15
Credit Ratings 16
Market for Securities 17
Prior Sales 17 pP. 49 TO 54 AND NOTE 20 (pP. 207 TO 210)
Escrowed Securities and Securities Subject to Contractual Restriction on 18 P. 210
Transfer
Normal Course Issuer Bid of the Bank 18 pP. 60 TO 62
Directors and Executive Officers 19 P. 7
Directors 19
Executive Officers 20
Shareholdings of Directors and Executive Officers 21
Cease-trading, Bankruptcies, Fines or Sanctions 21
Conflicts of Interest 21 NOTE 30 (pP. 229 AND 230)
Material Contracts 21
Legal Proceedings and Regulatory Actions 21 pP. 105 TO 112, 118 AND 226
Transfer Agent and Registrar 21
Interests of Experts 21
Information on the Audit Committee 22
Composition of the Audit Committee and Financial Literacy of Members 22
Guidelines for the Management of Services Provided by the Independent Auditor 23
and Fees Paid
Additional Information 24 PP. 12 AND 241
Appendix A - Explanation of Ratings 25
Appendix B - Audit Committee Mandate 29
ABBREVIATIONS USED
Act: Bank Act, S.C. 1991, c. 46
Annual Information Form: This annual information form
Annual Report: The Bank's Annual Report to shareholders, including Management's Discussion
and Analysis and
the consolidated audited annual financial statements for the fiscal year ended
October 31, 2024
Bank: National Bank of Canada
Board: Board of Directors of the Bank
Circular: Management Proxy Circular in respect of the most recent annual meeting of
holders of common shares that involved the election of directors
CFA(®): Chartered Financial Analyst
CPA: Chartered Professional Accountants
CSA: Canadian Securities Administrators
CWB: Canadian Western Bank
DBRS: Morningstar DBRS
Deloitte: Deloitte LLP
Fitch: Fitch Ratings Canada Inc.
IFRS: International Financial Reporting Standards
LRCN Trust: NBC LRCN Limited Recourse Trust
LRCN: Limited Recourse Capital Notes
Moody's: Moody's Investors Service Inc.
NVCC: Non-Viability Contingent Capital
OSFI: Office of the Superintendent of Institutions (Canada)
SEDAR+: System for Electronic Document Analysis and Retrieval+
S&P: Standard & Poor's Financial Services LLC
TSX: Toronto Stock Exchange
DISTRIBUTION NOTICE OF THIS ANNUAL INFORMATION FORM
This Annual Information Form must be accompanied by copies of all documents
incorporated herein by reference when it is provided to security holders or
other interested parties.
Parts of the Annual Information Form are presented in the Annual Report to
shareholders and in the Management's Discussion and Analysis ("MD&A") for
the fiscal year ended October 31, 2024 and are incorporated herein by
reference. The Material Change Report dated June 12, 2024 regarding the
definitive agreement to acquire CWB is also incorporated herein by reference.
The information contained in the various booklets or reports published by
National Bank of Canada (the "Bank") or available on the Bank's website and
mentioned in the Annual Information Form is not, and shall not be deemed to
be, incorporated by reference in the Annual Information Form, unless expressly
stated otherwise.
The Annual Report is available on the Bank's website (nbc.ca
(https://www.nbc.ca/) ) and SEDAR+ (sedarplus.ca
(https://www.sedar.com/homepage_en.htm) ). The Material Change Report dated
June 12, 2024 regarding the definitive agreement for the acquisition of CWB is
available on SEDAR+.
EXPLANATORY NOTE
In this Annual Information Form, unless otherwise indicated, information is
presented as at October 31, 2024.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this document and in the documents incorporated by
reference herein are forward-looking statements. These statements are made in
accordance with applicable securities legislation in Canada and the United
States. The forward-looking statements in this document and in the documents
incorporated by reference herein may include, but are not limited to,
statements set out in the messages from our management, as well as other
statements made about the economy, market changes, the Bank's objectives,
outlook, and priorities for fiscal year 2025 and beyond, the strategies or
actions that will be taken to achieve them, expectations for the Bank's
financial condition and operations, the regulatory environment in which it
operates, its environmental, social, and governance targets and commitments,
the anticipated acquisition of Canadian Western Bank and the impacts and
benefits of the transaction, and certain risks to which the Bank is exposed.
The Bank may also make forward-looking statements in various other documents
and regulatory filings, as well as orally. These forward-looking statements
are typically identified by verbs or words such as "outlook", "believe",
"foresee", "forecast", "anticipate", "estimate", "project", "expect", "intend"
and "plan", in their future or conditional forms, notably verbs such as
"will", "may", "should", "could" or "would" as well as similar terms and
expressions.
These forward-looking statements are intended to assist the security holders
of the Bank in understanding the Bank's financial position and results of
operations as of the dates indicated and for the periods having ended on the
dates presented, as well as the Bank's vision, strategic objectives, and
performance targets, and may not be appropriate for other purposes. These
forward-looking statements are based on current expectations, estimates,
assumptions and intentions believed by the Bank to be reasonable as at the
date thereof and are subject to inherent uncertainty and risks, many of which
are beyond the Bank's control. There is a strong possibility that the Bank's
express or implied predictions, forecasts, projections, expectations, or
conclusions will not prove to be accurate, that its assumptions may not be
confirmed, and that its vision, strategic objectives, and performance targets
will not be achieved. The Bank cautions investors that these forward-looking
statements are not guarantees of future performance and that actual events or
results may differ materially from these statements due to a number of
factors. Therefore, the Bank recommends that readers not place undue reliance
on these forward-looking statements, as a number of factors could cause actual
results to differ materially from the expectations, estimates, or intentions
expressed in these forward-looking statements. Investors and others who rely
on the Bank's forward-looking statements should carefully consider the factors
listed below as well as other uncertainties and potential events, and the risk
they entail. Except as required by law, the Bank does not undertake to update
any forward-looking statements, whether written or oral, that may be made from
time to time, by it or on its behalf.
Assumptions about the performance of the Canadian and U.S. economies in 2025
and how that performance will affect the Bank's business are among the factors
considered in setting the Bank's strategic priorities and objectives,
including allowances for credit losses. These assumptions appear in the
Economic Review and Outlook section and, for each business segment, in the
Economic and Market Review sections, and may be updated in the quarterly
reports to shareholders filed thereafter.
The forward-looking statements made in this document and in the documents
incorporated by reference herein are based on a number of assumptions and
their future outcome is subject to a variety of risk factors, many of which
are beyond the Bank's control and the impacts of which are difficult to
predict. These risk factors include, among others, risks and uncertainties
related to the expected regulatory processes and outcomes in connection with
the proposed acquisition of CWB (the proposed transaction), such as the
possible delay or failure to close the proposed transaction, the potential
failure to obtain the required approvals to the proposed transaction in a
timely manner or at all, the Bank's ability to successfully integrate CWB upon
completion of the proposed transaction, the potential failure to realize
anticipated synergies and benefits from the proposed transaction, and
potential undisclosed costs or liability associated with the proposed
transaction; the general economic environment and business and financial
market conditions in Canada, the United States, and the other countries where
the Bank operates; exchange rate and interest rate fluctuations; inflation;
global supply chain disruptions; higher funding costs and greater market
volatility; changes made to fiscal, monetary, and other public policies;
regulatory oversight and changes made to regulations that affect the Bank's
business; geopolitical and sociopolitical uncertainty; climate change,
including physical risks and those related to the transition to a low-carbon
economy; the Bank's ability to satisfy stakeholder expectations on
environmental and social issues, the need for active and continued
participation of stakeholders; the availability of comprehensive and accurate
data from customers and other third parties, including greenhouse gas
emissions; the ability of the Bank to develop indicators to effectively
monitor our advancements; the development and deployment of new technologies
and sustainable products; the ability of the Bank to identify climate-related
opportunities as well as to assess and manage climate-related risks;
significant changes in consumer behaviour; the housing situation, real estate
market, and household indebtedness in Canada; the Bank's ability to achieve
its key short-term priorities and long-term strategies; the timely development
and launch of new products and services; the Bank's ability to recruit and
retain key personnel; technological innovation, including the open banking
system and the utilization of artificial intelligence; heightened
competition from established companies and from competitors offering
non-traditional services; model risk; changes in the performance and
creditworthiness of the Bank's clients and counterparties; the Bank's exposure
to significant regulatory matters or litigation; changes made to the
accounting policies used by the Bank to report financial information,
including the uncertainty inherent to assumptions and critical accounting
estimates; changes to tax legislation in the countries where the Bank
operates; changes made to capital and liquidity guidelines as well as to the
presentation and interpretation thereof; changes to the credit ratings
assigned to the Bank by financial and extra-financial rating agencies;
potential disruptions to key suppliers of goods and services to the Bank;
third-party risk, including failure of third parties to comply with their
obligations to the Bank; the potential impacts of disruptions to the Bank's
information technology systems, including cyberattacks as well as identity
theft and theft or disclosure of data, including personal information; the
risk of fraudulent activity; and possible impacts of major events affecting
the economy, market conditions, or the Bank's outlook, including international
conflicts, natural disasters, public health crises, and the measures taken in
response to these events; and the Bank's ability to anticipate and
successfully manage risks arising from all of the foregoing factors.
The foregoing list of risk factors is not exhaustive, and the forward-looking
statements made in this document and in the documents incorporated by
reference herein are also subject to credit risk, market risk, liquidity and
funding risk, operational risk, regulatory compliance risk, reputation risk,
strategic risk, and social and environmental risk as well as certain emerging
risks or risks deemed significant. Additional information about these factors
is provided in the Risk Management section of the Annual Report and may be
updated in the quarterly reports to shareholders filed thereafter.
CORPORATE STRUCTURE
Name, Address and Incorporation
The Bank is a Canadian bank governed by the Act and its head office is located
at National Bank Place, 800 Saint-Jacques Street, Montreal, Quebec, Canada,
H3C 1A3.
The Bank's roots date back to 1859 with the founding of Banque Nationale in
Quebec City. The Bank's current charter is the result of a series of
amalgamations, first with Banque d'Hochelaga in 1924 to form Bank Canadian
National, which then merged with The Provincial Bank of Canada in 1979 to form
National Bank of Canada. In 1985, the Bank acquired The Mercantile Bank of
Canada. In 1992, the Bank merged with National Bank Leasing Inc., its wholly
owned subsidiary.
Bank Subsidiaries (Intercorporate Relationships)
A list of the main Bank subsidiaries with a description of intercorporate
relationships can be found in the pages of the Annual Report specified in the
Table of Contents of the Annual Information Form and is incorporated herein by
reference.
GENERAL DEVELOPMENT OF THE BUSINESS
Three-Year History
Fiscal 2024:
The Bank's net income for fiscal 2024 was $3,816 million, up 16% from $3,289
million in fiscal 2023. Diluted earnings per share stood at $10.68 compared to
$9.24 in fiscal 2023.This increase is explained by revenue growth in all
business segments, mitigated by higher non-interest expenses and provisions
for credit losses. Income before provisions for credit losses and income taxes
was up 24% compared to fiscal 2023.
Total revenue for fiscal 2024 amounted to $11,400 million compared to $10,058
million in fiscal 2023, an increase of $1,342 million or 13% that was driven
by revenue growth in all of the Bank's business segments. Return on equity
(ROE) was 17.2% for fiscal 2024 compared to 16.3% in 2023.
As at October 31, 2024, the Bank's CET1, Tier 1, and Total capital ratios
were, respectively, 13.7%, 15.9% and 17.0%, compared to ratios of,
respectively, 13.5%, 16.0% and 16.8% as at October 31, 2023. The CET1 capital
ratio increased since October 31, 2023, essentially due to the contribution
from net income net of dividends and to common share issuances under the Stock
Option Plan. These factors were partly offset by the organic growth in
risk-weighted assets and by the impact of implementing OSFI's revised market
risk and CVA risk frameworks. Tier 1 and Total capital ratios were more
negatively affected by the RWA growth, although the decrease on the Total
capital ratio was offset by the $500 million issuance of medium-term notes.
In 2024, the Personal and Commercial segment's total revenues totaled $4,673
million, up 6% compared to $4,404 million in 2023. The increase in total
revenues was essentially attributable due to a $266 million increase in net
interest income that was mainly driven by growth in personal and commercial
loans and deposits, which more than offset the impact of the decrease of the
net interest margin to 2.33% compared to 2.35% in 2023.
Wealth Management segment's total revenues amounted to $2,786 million in
fiscal 2024, up 11% from $2,521 million in fiscal 2023. Net interest income
increased by $55 million or 7% mainly due to higher loan and deposit volumes.
Fee-based revenues rose 12% compared to fiscal 2023 as a result of the growth
in assets under administration and management caused by the rise in stock
markets as well as positive net inflows for the various solutions. In
addition, transaction and other revenues were up 13% compared to fiscal 2023
due to increased client activity in fiscal 2024.
Financial Market segment's total revenues on a taxable equivalent basis
amounted to $3,030 million in 2024, an increase of $374 million or 14%
compared to fiscal 2023. Global market revenues were up 20%, driven by
increases in all revenue types, including a 13% increase in equities revenues,
a 37% increase in interest rate and credit revenues, and a 14% increase in
commodities and foreign exchange revenues. In addition, corporate and
investment banking revenues were up 7% compared to fiscal 2023 as a result of
growth in banking service revenues and revenues from capital markets activity,
partly offset by lower revenues from merger and acquisition activity.
The U.S. Specialty Finance and International segment's total revenues amounted
to $1,415 million, up 17% from $1,209 million in 2023, owing to revenue
growth at Credigy and ABA Bank totalling $61 million and $134 million,
respectively, as well as dividend revenues recognized in 2024 related to an
investment in a financial group.
On June 11, 2024, the Bank entered into an agreement to acquire all of the
issued and outstanding common shares of CWB by way of a share exchange valuing
CWB at approximately $5 billion. Each CWB common share, other than those held
by the Bank, will be exchanged for 0.450 of a common share of National Bank.
CWB is a diversified financial services institution based in Edmonton,
Alberta. This transaction will enable the Bank to accelerate its growth across
Canada. The business combination brings together two complementary Canadian
banks with growing businesses, thereby enhancing customer service by offering
a full range of products and services nationwide, with a regionally focused
service model.
The transaction is subject to the satisfaction of customary closing
conditions, including regulatory approvals, and is expected to close in 2025.
The results of the acquired business will be consolidated from the date of
closing.
Fiscal 2023 1F((
2 (#_ftn2)
)):
The Bank's net income for fiscal 2023 was $3,289 million compared to $3,383
million for the corresponding period of 2022, a decrease of 3%. Diluted
earnings per share were $9.24, against $9.61 for fiscal 2022. Revenue growth
in all business segments was offset by higher noninterest expenses, which was
attributable in part to specific items recorded in fiscal 2023 and by the
significant increase in provisions for credit losses. Income before provisions
for credit losses and income taxes remained relatively stable year over year.
Total revenues for fiscal 2023 were $10 058 million against $9,652 million for
fiscal 2022, an increase of $406 million, or 4%, stemming from revenue growth
in all of the Bank's business segments.
Return on equity (ROE) was 16.3% for fiscal 2023 compared to 18.8% in 2022.
The Bank's Common Equity Tier 1 (CET1), Tier 1 and total capital ratios were,
respectively, 13.5%, 16.0% and 16.8% as at October 31, 2023, compared to
ratios of 12.7%, 15.4% and 16.9%, respectively, as at October 31, 2022. All
equity ratios increased compared to October 31, 2022, essentially because of
net income, net of dividends, issuance of common shares pursuant to the Stock
Option Plan, and the positive impact of applying the Basel III reforms to the
credit and operational risk frameworks. These factors were tempered by the
growth of risk-weighted assets and the end of the transitional measure for the
provisioning of expected credit losses introduced by OSFI at the start of the
COVID-19 pandemic. The increase in the total capital ratio was mitigated by
the redemption of $750 million in medium-term notes on February 1, 2023.
Lastly, the dividend payout ratio was 42.0% in 2023 compared to 36.8% in 2022.
In the Personal and Commercial Banking segment, total revenues were up by $370
million, driven mainly by higher net interest income of $456 million, which
was attributable chiefly to the increase in deposit margins (partly offset by
a lower margin on loans) in connection with higher interest rates in 2023.
This increase had a favourable impact on the net interest margin which reached
2.35%, versus 2.15% in 2022. Moreover, the increase in net interest income was
generated by the growth in personal and commercial loans and deposits.
Total revenues in the Wealth Management segment rose to $2,521 million in
fiscal 2023, an increase of 6% compared to $2,375 million in fiscal 2022. Net
interest income was up $184 million, or 31%, owing to interest rate increases
in 2023 and 2022. Fee-based revenues stood relatively stable as against fiscal
2022. Moreover, transaction-based revenues and other revenues were down 12%
from 2022 owing to lower commissions on transactions in 2023.
In the Financial Markets sector, total revenues rose by $188 million to $2,656
million in 2023, an increase of 8% year over year. Revenues from global
markets were down 1% owing to an 8% decrease in revenues from equities while
revenues from fixed-income securities and commodities and currencies rose by
14% and 11%, respectively. Moreover, Corporate and Investment Banking revenues
rose 20% from fiscal 2022 owing to growth in revenues from banking services,
higher revenues from capital market activities, as well as revenues from
merger and acquisition activities.
Total revenues in the U.S. Specialty Finance and International segment were up
9% from $1,110 million in 2022 to $1,209 million in 2023, driven by revenues
from the Credigy and ABA Bank subsidiaries, which rose $44 million and $57
million, respectively.
Fiscal 2022:
The Bank's net income for fiscal 2022 was $3,383 million compared to $3,140
million for the corresponding period of 2021, an increase of 8%. Diluted
earnings per share were $9.61 for the fiscal year ended October 31, 2022,
versus $8.85 in 2021. The excellent performance turned in by all business
segments, achieved through revenue growth, contributed to higher net income,
which was tempered by the increase in provisions for credit losses due in part
to a deterioration in the macroeconomic outlook in the second half of 2022.
Income before provisions for credit losses and income taxes was $4,422 million
for the fiscal year ended October 31, 2022, an increase of 10% from 2021,
owing to revenue growth in all business segments, which more than offset
higher noninterest expenses. Total revenues for fiscal 2022 were $9,652
million as against $8,927 million for fiscal 2021, an increase of $725
million, or 8%, stemming mainly from loan and deposit growth, but also from a
higher net interest margin as a result of the recent interest rate increases.
Return on equity (ROE) was 18.8% for fiscal 2022 compared to 20.7% in 2021.
The Bank's Common Equity Tier 1 (CET1), Tier 1 and total capital ratios were,
respectively, 12.7%, 15.4% and 16.9% as at October 31, 2022, compared to
ratios of 12.4%, 15.0% and 15.9%, respectively, as at October 31, 2021.2F 3
(#_ftn3) All equity ratios increased compared to October 31, 2021,
essentially because of net income, net of dividends, and issuance of common
shares pursuant to the Stock Option Plan. These factors were tempered by the
growth of risk-weighted assets, share buybacks, and the impact of the
transitional measure for the provisioning of expected credit losses, for which
the scaling factor decreased from 50% to 25%. Lastly, the dividend payout
ratio was 36.8% in 2022 compared to 31.7% in 2021. In the Personal and
Commercial Banking segment, total revenues were up by $419 million driven by
personal and commercial loan and deposit growth. Moreover, the interest rate
increases in fiscal 2022 had a favourable impact on the net interest margin
which reached 2.14%, as against 2.11% in 2021, an increase attributable mainly
to margins on deposits. Total revenues in the Wealth Management segment
increased 10%. Net interest income rose $148 million, or 33%, owing to
interest rate increases, loan and deposit volume growth, and deposit margins.
Fee-based revenues increased 8% given growth in average assets under
administration and assets under management generated by net inflows in various
solutions and by stronger stock market performance in the first half of 2022
compared to fiscal 2021. Revenues in the Financial Markets segment increased
11% owing to revenues from global markets which rose 28% year over year owing
to growth across every revenue category, notably revenues from equities as
market conditions favoured greater client activity. Moreover, Corporate and
Investment Banking revenues decreased from fiscal 2021, mainly because of
lower revenues from capital market activities tempered by revenues from
favourable merger and acquisition activities, as well as by loan volume
growth. In the U.S. Specialty Finance and International segment, revenues were
up 11% year over year, driven by the revenues from the Advanced Bank of Asia
Limited subsidiary, which is experiencing sustained growth.
DESCRIPTION OF THE BUSINESS
Business
The description of the Bank's business can be found in the pages of the Annual
Report specified in the Table of Contents of the Annual Information Form and
is incorporated herein by reference.
Products and Services
Information on the Bank's products and services can be found in the pages of
the Annual Report specified in the Table of Contents of the Annual Information
Form and is incorporated herein by reference.
Specialized Skills and Knowledge
Information on the required specialized skills and knowledge can be found in
the pages of the Annual Report specified in the Table of Contents of the
Annual Information Form and is incorporated herein by reference.
Competitive Conditions
A summary of the competitive conditions in the main markets and geographic
areas in which the Bank conducts its business can be found in the pages of the
Annual Report specified in the Table of Contents of the Annual Information
Form and is incorporated herein by reference.
New Products
Information on new products can be found in the pages of the Annual Report
specified in the Table of Contents of the Annual Information Form and is
incorporated herein by reference.
Intangible Assets
Information on the Bank's intangible assets can be found in the pages of the
Annual Report specified in the Table of Contents of the Annual Information
Form and is incorporated herein by reference.
Environmental Protection
Information on the management of the Bank's current activities related to
environmental protection can be found in the pages of the Annual Report
specified in the Table of Contents of the Annual Information Form and is
incorporated herein by reference. For further details, consult the 2023 Report
on Environmental, Social and Governance (ESG) Advances as well as the 2023
Climate Report, available on the nbc.ca (https://www.nbc.ca/) website or via
the direct link nbc.ca/about-esg (https://bnc.ca/esg) .
Number of Employees
The Bank had 31,303 employees at the end of the fiscal year on October 31,
2024. The number of employees includes employees of the Bank's subsidiaries.
Assets under Administration and Assets under Management
Information on the Bank's assets under administration and assets under
management can be found in the pages of the Annual Report specified in the
Table of Contents of the Annual Information Form and is incorporated herein by
reference.
Loans by Borrower Category
The distribution of gross loans by borrower category can be found in the pages
of the Annual Report specified in the Table of Contents of the Annual
Information Form and is incorporated herein by reference.
Investment Policies and Lending and Investment Restrictions
Information on investment policies and lending and investment restrictions can
be found in the pages of the Annual Report specified in the Table of Contents
of the Annual Information Form and is incorporated herein by reference.
Provision for Credit Losses
Information on the provision for credit losses can be found in the pages of
the Annual Report specified in the Table of Contents of the Annual Information
Form and is incorporated herein by reference.
Corporate Responsibility
The description of the social and environmental policies implemented by the
Bank can be found in the pages of the Annual Report specified in the Table of
Contents of the Annual Information Form and is incorporated herein by
reference. For further details, consult the 2023 Report on Environmental,
Social and Governance (ESG) Advances as well as the 2023 Climate Report,
available on the nbc.ca (https://www.nbc.ca/) website or via the direct link
nbc.ca/about-esg (https://bnc.ca/esg) .
RISK FACTORS
Information on the main risk factors for the Bank can be found in the pages of
the Annual Report specified in the Table of Contents of the Annual Information
Form and is incorporated herein by reference.
ASSET-BACKED SECURITIES OUTSTANDING
Information on the Bank's asset-backed securities outstanding can be found in
the pages of the Annual Report specified in the Table of Contents of the
Annual Information Form and is incorporated herein by reference.
DIVIDENDS
Information on the dividends declared and paid during the last three fiscal
years can be found in the pages of the Annual Report specified in the Table of
Contents of the Annual Information Form and is incorporated herein by
reference.
CAPITAL STRUCTURE
As at October 31, 2024, the Bank's authorized share capital consists of an
unlimited number of common shares without par value, that may be issued for an
amount of consideration as determined by the Board, and an unlimited number of
first preferred shares without par value, which may be issued in series,
provided that the First Preferred Shares outstanding at any time have been
issued for a maximum aggregate consideration of $7,500,000,000, or the
equivalent thereof in foreign currencies. The Bank's authorized share capital
also consisted of 15,000,000 second-preferred shares without par value, which
may be issued for a maximum aggregate amount of consideration of $300,000,000,
or the equivalent in foreign currencies. The main features of each of these
classes and series are described below. The Bank's by-laws and the actual
terms and conditions of such shares take precedence over the following summary
of share capital.
Details on the Bank's capital structure can be found in the pages of the
Annual Report specified in the Table of Contents of the Annual Information
Form and are incorporated herein by reference.
Common Shares
As at October 31, 2024, there were 19,570 registered holders of common shares
of the Bank.
The common shares carry and are subject to the rights, privileges,
restrictions and conditions set out below:
Dividends:
Holders of common shares are entitled to receive dividends, in such amounts
and payable at such times as the Board determines.
Liquidation, Dissolution or Winding Up:
In the event of the liquidation, dissolution or winding up of the Bank, after
payment to the holders of first preferred shares and to the holders of second
preferred shares of the amounts described under "First Preferred Shares" and
under "Second Preferred Shares" or to holders of any class of shares ranking
ahead of common shares, respectively, the remaining property of the Bank will
be distributed equally among the holders of common shares in proportion to the
number of ordinary shares they hold.
Voting Rights:
Subject to certain restrictions, holders of common shares are entitled to cast
one vote per share at all meetings of shareholders of the Bank, except
meetings at which only holders of a specified class or series of shares are
entitled to vote.
First Preferred Shares
As at October 31, 2024, the First Preferred Shares, Series 30, 31, 32, 33, 38,
39, 40, 41, 42, 43, 44, 45, and 46 ("First Preferred Shares") are part of the
Bank's authorized share capital, but only Series 30, 32, 38, 40, 42, 44, 45,
and 46 have been issued and are outstanding ("issued and outstanding series").
Series 44, 45 and 46 were issued in favour of a limited course trust to be
held as assets in trust as part of the Limited Recourse Capital Notes (LRCN)
structure. These series are not listed with the TSX.
The first preferred shares carry and are subject to the rights, privileges,
restrictions and conditions set out below:
Rank:
First preferred shares of each series rank equally with first-preferred shares
of all series and have priority over common shares and over any other Bank
shares ranking lower than the first preferred shares with respect to the
payment of dividends and the distribution of assets in the event of a
liquidation, dissolution or winding up of the Bank.
Issuance in Series:
First preferred shares may be issued, subject to the provisions of the Act, in
one or more series. The Board may, by resolution, establish the number of
shares in, and determine the respective designations, rights, privileges,
restrictions and conditions of each series (other than series already issued
and outstanding), including the rate, amount or calculation method and terms
of payment of dividends and terms and conditions of redemption, purchase or
conversion and sinking fund or purchase fund provisions.
Creation or Issue of Superior or Equal-Ranking Shares:
The Bank may not, without the prior approval of the holders of first preferred
shares in addition to such approval as may be required by the Act or any other
legal requirement, create or issue any shares ranking in priority to or pari
passu with the first preferred shares; or create or issue any additional
series of first preferred shares, unless at the date of such creation or
issuance of all cumulative dividends up to and including the dividend payment
for the last completed period for which such cumulative dividends are payable,
have been declared and paid or set aside for payment in respect of each series
of cumulative first preferred shares then issued and outstanding, and all
declared and unpaid non-cumulative dividends have been paid or set aside for
payment in respect of each series of non-cumulative first preferred shares
then issued and outstanding.
Changes to Series:
The Bank may not, without prior approval of the holders of first preferred
shares of the series concerned, and subject to the approvals required by the
Act, or any other legal requirement, delete or change the relevant provisions
of the first preferred shares. Holders of first preferred shares of the series
concerned may give their approval by resolution adopted by at least two-thirds
of the votes cast at a meeting of the holders of the shares of the series
concerned, where the majority of shares outstanding in the series concerned is
represented or, if such a quorum is not obtained at this meeting, any
rescheduled meeting where the shareholders are present or represented by proxy
would constitute the quorum needed.
Dividends:
Holders of all series of first preferred shares are entitled to receive
dividends in such amounts and payable at such times as the Board determines,
in accordance with the conditions of the series. Holders of any series of
first preferred shares are entitled to preference over the holders of common
shares, second preferred shares and shares of any other class of Bank shares
ranking junior to the first preferred shares. In the case of cumulative
dividends, the priority will cover all dividends accrued (which for such
purpose will be calculated as if such dividends were accruing from day to day)
and unpaid. In the case of non-cumulative dividends, the priority will cover
all declared and unpaid dividends. Holders of any series of first preferred
shares are not entitled to any dividends other than those expressly provided
for in the rights, privileges, restrictions and conditions attached to such
series of first preferred shares.
Liquidation, Dissolution or Winding Up:
In the event of the liquidation, dissolution or winding up of the Bank, before
any amount is paid or any property distributed to the holders of common
shares, second preferred shares, or shares of any other class of Bank shares
ranking lower than the first preferred shares, the holders of each series of
first preferred shares are entitled to receive (i) an amount equal to the
price at which such shares were issued, (ii) such premium, if any, as has been
provided for with respect to such series, and (iii) in the case of cumulative
first preferred shares, all cumulative accrued and unpaid dividends and, in
the case of non-cumulative first preferred shares, all non-cumulative
dividends declared and remaining unpaid on and including the date of
distribution. After payment to the holders of first preferred shares of the
amounts so payable to them, they may not participate in any further
distribution of the property or assets of the Bank.
Voting Rights:
Subject to the provisions of the Act and except as otherwise provided in the
rights, privileges, restrictions and conditions attaching to any series of
first preferred shares, the holders of first preferred shares do not, as such,
have any voting rights for the election of directors of the Bank, the
appointment of the independent auditor, or for any other purpose nor are they
entitled to receive any notice of or attend shareholders' meetings.
Redemption:
Subject to the consent of the OSFI and the provisions of the Act, the Bank
may, at its discretion, redeem for cash the first preferred shares, in whole
or in part, on the dates and at the amounts set out in the conditions of the
series.
Conversion:
Subject to certain conditions, holders of first preferred shares will have the
right, at their discretion, to convert all or part of their shares into the
corresponding number of first preferred shares of another series, on a fixed
date, if applicable, in accordance with the series conditions.
First Preferred Shares, Series 44:
Non-Cumulative 5-Year Rate-Reset Series 44 First Preferred Shares ("Preferred
Shares, Series 44") are part of the Bank's authorized share capital and of the
assets of the NBC LRCN. As of September 9, 2020, and concurrently with the
issuance of 4.300% Limited Recourse Capital Notes, Series 1 ("LRCN, Series
1"), 500,000 Preferred Shares, Series 44, were issued at a price of $1,000
each in favour of the Computershare Trust Company of Canada as trustee for the
LRCN Trust.
Each LRCN, Series 1, gives the holder a proportionate share of the assets of
the LRCN Trust in case of: i) non-payment of interest on one of the
interest-payment dates; ii) non-payment of the redemption amount in the event
the LRCN, Series 1, are redeemed; iii) non-payment of principal of the LRCN,
Series 1, when due or; iv) a case of default regarding the LRCN, Series 1.
Under such circumstances, the holders of LRCN, Series 1, would be entitled to
receive Preferred Shares, Series 44, which would pay a fixed rate
non-cumulative preferential cash dividends, redeemable at the Bank's option as
of October 15, 2025, except in the case of a redemption of LRCN, Series 1 or a
special event, and subject to the provisions of the law and prior consent from
OSFI.
As long as Preferred Shares, Series 44, are held by Computershare Trust
Company of Canada as trustee of the LRCN Trust, they do not pay dividends.
First Preferred Shares, Series 45:
Non-Cumulative 5-Year Rate-Reset Series 45 First Preferred Shares ("Preferred
Shares, Series 45") are part of the Bank's authorized share capital and of the
assets of the NBC LRCN Trust. As at April 21, 2021, and concurrently with the
issuance of 4.05% Limited Recourse Capital Notes, Series 2 ("LRCN, Series 2"),
500,000 Preferred Shares, Series 45, were issued at a price of $1,000 each in
favour of the Computershare Trust Company of Canada as trustee for the LRCN
Trust.
Each LRCN, Series 2, gives the holder a proportionate share of the assets of
the LRCN Trust in case of: i) non-payment of interest on one of the
interest-payment dates; ii) non-payment of the redemption amount in the event
the LRCN, Series 2, are redeemed; iii) non-payment of principal of the LRCN,
Series 2, when due, or; iv) a case of default regarding the LRCN, Series 2.
Under such circumstances, the holders of LRCN, Series 2, would be entitled to
receive Preferred Shares, Series 45, which would pay a fixed rate
non-cumulative preferential cash dividends, redeemable at the Bank's option as
of July 15, 2026, except in the case of a redemption of LRCN, Series 2, or a
special event, and subject to the provisions of the law and prior consent from
OSFI.
As long as Preferred Shares, Series 45, are held by Computershare Trust
Company of Canada as trustee of the LRCN Trust, they do not pay dividends.
First Preferred Shares, Series 46:
Non-Cumulative 5-Year Rate-Reset Series 46 First Preferred Shares ("Preferred
Shares, Series 46") are part of the Bank's authorized share capital and of the
assets of the NBC LRCN Trust. As at September 8, 2022, and concurrently with
the issuance of 7.500% Limited Recourse Capital Notes, Series 3 ("LRCN, Series
3"), 500,000 Preferred Shares, Series 46, were issued at a price of $1,000
each in favour of Computershare Trust Company of Canada as trustee for the
LRCN Trust.
Each LRCN, Series 3, gives the holder a proportionate share of the assets of
the LRCN Trust in case of: i) non-payment of interest on one of the
interest-payment dates; ii) non-payment of the redemption amount in the event
of the LRCN, Series 3, are redeemed; iii) non-payment of principal of the
LRCN, Series 3, when due, or; iv) a case of default regarding the LRCN, Series
3.
Under such circumstances, the holders of LRCN, Series 3, would be entitled to
receive Preferred Shares, Series 46, which would pay fixed rate non-cumulative
preferential cash dividends, redeemable at the Bank's option as of November
16, 2027, except in the case of a redemption of LRCN, Series 3, or a special
event, and subject to provisions of the law and prior consent from OSFI.
As long as Preferred Shares, Series 46, are held by Computershare Trust
Company of Canada as trustee of the LRCN Trust, they do not pay dividends.
Automatic Conversion of Non-Viability Contingent Capital (NVCC)
In accordance with the capital adequacy requirements adopted by OSFI,
non-common capital instruments issued after January 1, 2013, including
subordinated debt securities and first preferred shares, must include terms
providing for the full and permanent conversion of such securities into common
shares upon the occurrence of certain trigger events relating to financial
viability to qualify as regulatory capital.
The conditions of the first preferred shares provide that these shares will
automatically and immediately be converted, on a full and permanent basis,
into a specified number of common shares of the Bank as determined using an
automatic conversion formula (value of the share, which is $25.00 or $1,000
based on the conditions set out for each series, plus all declared and unpaid
dividends for these shares, divided by the conversion price, which for first
preferred shares is the greater of a floor price of $5.00 (subject to certain
adjustments) and the market price of the Bank's common shares or, in the
absence of such a market price, their fair value) upon the occurrence of a
trigger event.
A trigger event is defined as follows: (i) OSFI publicly announces that the
Bank has been advised, in writing, that OSFI is of the opinion that the Bank
has ceased, or is about to cease to be viable and that, after the conversion
of all preferred shares and all other contingent instruments issued by the
Bank, and taking into account any other factors or circumstances that are
considered relevant or appropriate, it is reasonably likely that the viability
of the Bank will be restored or maintained or (ii) a federal or provincial
government in Canada publicly announces that the Bank has accepted or agreed
to accept a capital injection, or equivalent support, from the federal
government or any provincial government or political subdivision or agent or
agency thereof without which the Bank would have been determined by OSFI to be
non-viable.
Second Preferred Shares
Second preferred shares are part of the Bank's authorized share capital, but
no shares in this category had been issued as at October 31, 2024. Second
preferred shares carry and are subject to the rights, privileges, restrictions
and conditions set out below:
Rank:
Second preferred shares rank senior to the common shares and the shares of any
other class of Bank shares that rank junior to the second preferred shares but
rank lower than the first preferred shares with regard to dividends and return
of capital in the event of the liquidation, dissolution or winding up of the
Bank.
Issuance in Series:
Second preferred shares may be issued from time to time in one or more series.
The Board may, by resolution, subject to the provisions of the Act, set the
number of shares in, and determine the respective designations, rights,
privileges, restrictions and conditions of each series, including the rate,
amount or calculation method and terms of payment of dividends and terms and
conditions of redemption, purchase or conversion and sinking fund or purchase
fund provisions.
Creation or Issue of Superior or Equal Ranking Shares:
The Bank may not, without the prior approval of the holders of second
preferred shares in addition to such approval as may be required by the Act or
any other legal requirement, create or issue any shares ranking in priority to
or pari passu with the second-preferred shares; or create or issue any
additional series of second-preferred shares, unless at the date of such
creation or issuance of all cumulative dividends up to and including the
dividend payment for the last completed period for which such cumulative
dividends are payable, have been declared and paid or set aside for payment in
respect of each series of cumulative second preferred shares then issued and
outstanding, and all declared and unpaid non-cumulative dividends have been
paid or set aside for payment in respect of each series of non-cumulative
second preferred shares then issued and outstanding.
Changes to Series:
The Bank may not, without prior approval of the holders of second preferred
shares of the series concerned, and subject to the approvals required by the
Act, or any other legal requirement, delete or change the relevant provisions
of the second preferred shares. Holders of first preferred shares of the
series concerned may give their approval by resolution adopted by at least
two-thirds of the votes cast at a meeting of the holders of the shares of the
series concerned, where the majority of shares outstanding in the series
concerned is represented or, if such a quorum is not obtained at this meeting,
any rescheduled meeting where the shareholders are present or represented by
proxy would constitute the quorum needed.
Dividends:
Holders of second preferred shares are entitled to receive dividends in such
amounts and payable at such times as the Board determines. With respect to
dividends, holders of any series of second-preferred shares have priority over
the holders of common shares or any other class of Bank shares ranking junior
to the second preferred shares. In the case of cumulative dividends, the
priority will cover all dividends accrued (which for such purpose will be
calculated as if such dividends were accruing from day to day) and unpaid. In
the case of non-cumulative dividends, the priority will cover all declared and
unpaid dividends. The holders of any series of second-preferred shares are not
entitled to any dividends other than those expressly provided for in the
rights, privileges, restrictions and conditions attached to such series of
second-preferred shares.
Liquidation, Dissolution or Winding Up:
In the event of the liquidation, dissolution or winding up of the Bank, before
any amount is paid or any property distributed to the holders of common shares
or shares of any other class of Bank shares ranking junior to the second
preferred shares, the holders of each series of second-preferred shares are
entitled to receive (i) an amount equal to the price at which such shares were
issued, (ii) such premium, if any, as has been provided for with respect to
such series, and (iii) in the case of cumulative second preferred shares, all
cumulative accrued and unpaid dividends, and in the case of non-cumulative
second preferred shares, all non-cumulative dividends declared and remaining
unpaid up to and including the date of distribution. After payment to the
holders of second preferred shares of the amounts so payable to them, they may
not participate in any further distribution of the property or assets of the
Bank.
Voting Rights:
Subject to the provisions of the Act and except as otherwise provided in the
rights, privileges, restrictions and conditions attaching to any series of
second-preferred shares, the holders of second preferred shares do not, as
such, have any voting rights for the election of directors of the Bank, the
appointment of the independent auditor, or for any other purpose nor are they
entitled to receive any notice of or attend shareholders' meetings.
Restrictions on Bank Shares under the Act
The Act contains restrictions on the issue, transfer, acquisition, beneficial
ownership and voting of all shares of a chartered bank. The following is a
summary of such restrictions.
Subject to certain exceptions specified in the Act, no person may be a major
shareholder of a bank if the bank has equity of
$12 billion or more. In the event that the equity of the Bank is less than $12
billion and the Act would otherwise permit a person to own up to 65% of any
class of shares of the Bank, the Bank is deemed to be a bank to which the
ownership restrictions for banks with equity of $12 billion or more apply
until the Minister of Finance (Canada) specifies, on application by the Bank,
that these restrictions no longer apply to the Bank.
A person is a major shareholder of a bank where a) the aggregate of shares of
any class of voting shares of a bank beneficially owned by that person, by
entities controlled by that person and by any person acting jointly or in
concert with that person is more than 20% of all of the outstanding shares of
that class of shares; or b) the aggregate of shares of any class of non-voting
shares of a bank beneficially owned by that person, by entities controlled by
that person and by any person acting jointly or in concert with that person is
more than 30% of all of the outstanding shares of that class of non-voting
shares.
Furthermore, no person may have a significant interest in any class of shares
of a bank, without approval under the Act. A person has a significant interest
in a class of shares of a bank where the aggregate of any shares of the class
beneficially owned by that person, by entities controlled by that person and
by any person acting jointly or in concert with that person exceeds 10% of all
of the outstanding shares of that class of shares of such bank. Subject to
certain exceptions, the Act also prohibits the registration of a transfer or
issue of any shares of the Bank to His Majesty in right of Canada or of a
province or any agent or agency of His Majesty, in either of those rights, or
to the government of a foreign country or any political subdivision, agent or
agency of any of them.
Subscription Receipts
In connection with the proposed acquisition of CWB, the Bank distributed an
aggregate of 9,262,500 subscription receipts at a price of $112.30 per
subscription receipt pursuant to a public offering (the "Public Offering") and
concurrent private placement (the "Concurrent Private Placement") for a total
amount of $1.0 billion.
Pursuant to the Public Offering, on June 17, 2024, the Bank issued and sold
4,453,000 subscription receipts at a price of $112.30 for total gross proceeds
of approximately $500 million. The Public Offering was underwritten on a
bought-deal basis by a syndicate of underwriters (the "Underwriters"). On July
17, 2024, the Bank issued and sold 178,250 additional subscription receipts
pursuant to the partial exercise of the Underwriters' over-allotment option.
Pursuant to the Concurrent Private Placement, on June 17, 2024, the Bank
issued and sold 4,453,000 subscription receipts at a price of $112.30 per
subscription receipt to an affiliate of Caisse de dépôt et placement du
Québec ("CDPQ") for gross proceeds of approximately $500 million. On July 17,
2024, the Bank issued and sold 178,250 additional subscription receipts to an
affiliate of CDPQ pursuant to CDPQ's option to purchase additional
subscription receipts to maintain its pro-rata ownership.
Each subscription receipt entitles the holder thereof to receive automatically
upon closing of the proposed transaction, without any action on the part of
the holder and without payment of additional consideration, (i) one common
share of National Bank, and (ii) a cash payment equal to the amount per common
share of any cash dividends declared by the Bank and for which the record date
falls within the period commencing on June 17, 2024 up to (but excluding) the
last day the subscription receipts are outstanding (less applicable
withholding taxes, if any). In the event that the transaction fails, the
subscription receipt holders have the right to the reimbursement of the full
amount, including interest earned.
Notes
As at October 31, 2024, the Bank currently has outstanding $750 million 5.426%
Medium Term Notes due August 16, 2032 and $500 million 5.279% Medium Term
Notes due February 15, 2034 (Non-Viability Contingent Capital (NVCC)) (the
"Subordinated Notes") which form part of the Bank's regulatory capital. The
Bank also currently has outstanding $500 million LRCN, Series 1, $500 million
LRCN, Series 2, and $500 million LRCN, Series 3 (collectively, the "LRCNs")
which are classified as equity and form part of the Bank's additional tier 1
non-viability contingent capital.
The Subordinated Notes and the LRCNs carry and are subject to the rights,
privileges, restrictions and conditions set out below:
Voting Rights:
The holders of Subordinated Notes do not, as such, have any voting rights for
the election of directors of the Bank, the appointment of the independent
auditor, or for any other purpose nor are they entitled to receive any notice
of or attend shareholders' meetings. If the Subordinated Notes are converted
into common shares of the Bank under NVCC requirements, holders of the
Subordinated Notes will become holders of the Bank's common shares and will
only have rights as holders of common shares. The holders of the LRCNs do not,
as such, have any voting rights for the election of directors of the Bank, the
appointment of the independent auditor, or for any other purpose nor are they
entitled to receive any notice of or attend shareholders' meetings. If the
Preferred Shares, Series 44, the Preferred Shares, Series 45, or the Preferred
Shares, Series 46 are converted into common shares of the Bank, holders of the
LRCNs will become holders of the Bank's common shares and will only have
rights as holders of common shares.
Liquidation, Dissolution or Winding Up:
The Subordinated Notes are direct unsecured obligations of the Bank,
constituting subordinated indebtedness for the purposes of the Act, ranking at
least equally with other subordinated indebtedness of the Bank. In the event
of the insolvency or winding up of the Bank, the indebtedness evidenced by the
Subordinated Notes, including, if a trigger event, as defined in the section
Automatic Conversion of Non-Viability Contingent Capital (NVCC), has not
occurred, the Subordinated Notes will be subordinate in right of payment to
the prior payment in full of the deposit liabilities of the Bank and all other
liabilities of the Bank except liabilities which by their terms rank in right
of payment equally with or subordinate to indebtedness evidenced by the
Subordinated Notes (including, but not limited to, the LRCNs, the First
Preferred Shares, the Bank's second preferred shares and the Bank's common
shares). Upon the occurrence of a trigger event, the subordination provisions
of the Subordinated Notes will not be relevant since the Notes will be
converted into Bank's common shares which will rank equally with all other
common shares of the Bank.
The LRCNs are direct unsecured obligations of the Bank constituting
subordinated indebtedness for the purpose of the Act which, if the Bank
becomes insolvent or is wound-up (prior to the occurrence of a trigger event,
as defined in the section Automatic Conversion of Non-Viability Contingent
Capital (NVCC)), will rank: (a) subordinate in right of payment to the prior
payment in full of all indebtedness, including certain subordinated
indebtedness (including but not limited to the Subordinated Notes) and (b) in
right of payment, equally with and not prior to indebtedness which by its
terms ranks equally in right of payment with, or is subordinate to, the LRCNs
(other than indebtedness which by its terms ranks subordinate to the LRCNs) in
each case, from time to time outstanding, and will be subordinate in right of
payment to the claims of the Bank's depositors and other unsubordinated
creditors. In the event of the Bank's insolvency or winding up, the LRCNs will
rank ahead of the Bank's common shares, First Preferred Shares and Second
Preferred Shares.
Purchase for Cancellation:
The Bank may at any time, with the prior consent of OSFI and subject to any
applicable law, purchase for cancellation any Subordinated Notes at any price
in the open market.
The Bank may at any time, with the prior written consent of OSFI, purchase for
cancellation any LRCNs at any price in the open market. Prior to any such
cancellation, the Bank shall, subject to the prior consent of OSFI, redeem a
corresponding number of Preferred Shares, Series 44, Preferred Shares, Series
45, or Preferred Shares, Series 46, as applicable (the aggregate face amount
of which shall equal the aggregate principal amount of the LRCNs to be
cancelled) then held by the LRCN Trust for cancellation.
Distributions and Restrictions on Dividend, Maturity and Redemption, Conversion and Other Information:
Additional information on the Bank's Subordinated Notes and the LRCNs,
including with respect to their redemption, conversion and the payment of
interests, can be found in the pages of the Annual Report specified in the
Table of Contents of the Annual Information Form and is incorporated herein by
reference.
Credit Ratings
The table below details the ratings assigned to the Bank's outstanding
securities by the following credit rating agencies as of October 31, 2024.
Credit ratings must not be construed as recommendations to purchase, sell or
hold securities of the Bank. The credit ratings assigned by ratings agencies
represent their assessment of the Bank's credit quality based on qualitative
information provided to them. Credit ratings may be revised at any time based
on macro-economic factors or on the current and projected financial condition
of the Bank.
The Bank has made customary payments to each of the ratings agencies in
connection with the assignment of ratings and/or may have made such payments
in respect of other services during the past two years.
Credit ratings are one of the main factors that influence the Bank's ability
to access financial markets at a reasonable cost. A downgrade in the Bank's
credit ratings could adversely affect the cost, size and term of future
funding.
Funding and liquidity levels remained sound and robust, and the Bank continues
to enjoy excellent access to the market for its funding needs. Refer to
Appendix A for additional information on credit ratings.
Moody's ((1)) S&P DBRS Fitch
Short-Term Debt P-1 A-1 R-1 (high) F1+
Canadian Commercial Paper - A-1 (mid) - -
Long-Term Deposits Aa3 - AA AA-
Long-Term Non Bail-inable Senior Debt ((2)) Aa3 A+ AA AA-
Senior Debt ((3)) A3 BBB+ AA (low) A+
Subordinated Debt Baa2 BBB+ A (high) A-
Subordinated Debt (NVCC) Baa2 (hyb) BBB A (low) -
Limited Recourse Capital Notes (NVCC) Ba1 (hyb) BB+ BBB (high) BBB
Preferred Shares (NVCC) Ba1 (hyb) P-3 (high) Pfd-2 -
Counterparty Risk ((4)) Aa3/P-1 - - AA-
Covered Bonds Program Aaa - AAA AAA
Outlook Under review for upgrade Stable Stable Stable
(1) On September 24, 2024, Moody's has placed on review for upgrade all
long-term ratings and assessments of National Bank of Canada (NBC), including
its baa1 baseline credit assessment (BCA), the Aa3 long-term deposits ratings
and Counterparty Risk Ratings, and its Counterparty Risk Assessment of
Aa3(cr).
(2) Includes Senior debt issued prior to September 23, 2018, and Senior
debt issued on or after September 23, 2018, which is excluded from the Bank
Recapitalization (Bail-in) Regime.
(3) Subject to conversion under the Bank Recapitalization (Bail-in)
Regime.
(4) Moody's terminology is "Counterparty Risk Rating" while Fitch's
terminology is "Derivative Counterparty Rating."
MARKET FOR SECURITIES
Trading Price and Volume
As at October 31, 2024, the common shares and the First Preferred Shares,
Series 30, 32, 38, 40 and 42 of the Bank, and the subscription receipts in
connection with the Public Offering as part of the agreement for the proposed
acquisition of CWB were listed in Canada on the TSX.
The following table shows the monthly price ranges and trading volumes of each
of the Bank's securities listed on the TSX for the fiscal year ended October
31, 2024.
2023/11 2023/12 2024/01 2024/02 2024/03 2024/04 2024/05 2024/06 2024/07 2024/08 2024/09 2024/10
High ($) 92.02 101.75 104.16 108.17 115.14 114.05 116.81 118.77 115.96 127.22 128.67 134.23
Common shares (NA)
Low ($) 85.46 91.44 98.04 100.47 105.68 109.67 110.01 105.43 107.70 110.50 123.00 126.48
Volume 20,673,962 51,061,352 29,932,540 18,735,732 53,058,580 44,182,986 35,207,272 48,539,306 37,406,209 24,360,974 45,637,599 37,711,547
High ($) 19.94 19.71 20.64 21.21 22.85 23.47 24.10 24.15 24.45 25.50 25.31 25.24
Series 30
(NA.PR.S)
Low ($) 17.90 18.55 19.15 20.51 21.00 22.65 23.17 22.81 23.62 24.16 24.90 24.73
Volume 382,961 324,527 367,179 370,302 585,384 713,843 451,390 460,861 277,724 187,726 180,950 275,373
High ($) 17.36 18.05 19,24 19.50 21.61 22.13 22.51 22.39 22.79 23.88 23.25 23.60
Series 32 (NA.PR.W)
Low ($) 15.88 16.83 17,50 18.80 19.08 20.84 21.75 19.31 21.91 22.10 22.94 22.65
Volume 73,069 138,065 93,774 287,322 225,254 327,538 305,652 364,224 251,643 153,072 786,841 201,723
High ($) 25.15 25.75 25.80 25.64 25.65 25.75 25.80 25.70 26.20 26.34 26.43 26.39
Series 38 (NA.PR.C)
Low ($) 23.80 25.09 25.20 25.00 25.00 25.00 25.40 25.00 25.41 25.80 26.10 25.55
Volume 146,648 367,064 574,195 117,914 120,813 256,749 363,800 245,814 271,334 138,879 246,321 167,583
High ($) 21.35 21.79 21.98 22.38 23.10 23.10 24.23 24.30 24.52 25.10 24.97 25.00
Series 40 (NA.PR.E)
Low ($) 18.93 20.26 21.30 21.92 21.93 22.01 23.04 23.01 23.42 24.25 24.51 24.35
Volume 103,729 177,869 118,560 111,992 66,967 312,232 245,673 131,519 486,884 217,975 148,403 199,678
High ($) 24.40 24.99 25.25 25.18 25.60 25.55 25.58 25.69 25.72 26.40 26.14 26.16
Series 42 (NA.PR.G)
Low ($) 21.90 24.09 24.37 24.04 24.62 24.90 25.05 24.94 25.13 25.35 25.81 25.58
Volume 171,645 298,634 160,256 263,525 239,604 359,354 264,093 161,964 164,973 187,617 107,958 45,196
High ($) 109.33 112.50 122.95 125.22 132.60
Subscription receipt ((1))
(NA.R)
Low ($) 102.50 107.66 109.00 118.03 122.88
Volume 340,402 354,847 537,362 450,798 195,008
(1) The subscription receipts were listed with the TSX since June 17, 2024
Prior Sales
Information concerning prior sales can be found on the pages of the Annual
Report specified in the Table of Contents of the Annual Information Form and
is incorporated herein by reference.
ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON
TRANSFER
As at October 31, 2024, the securities listed in the table below were, to the
Bank's knowledge, all the securities of the Bank held in escrow or securities
subject to restrictions on transfer.
Designation of class Number of securities held in escrow Percentage of class
Preferred Shares, Series 44 (1) 500,000 100% of Preferred Shares, Series 44
Preferred Shares, Series 45 (1) 500,000 100% of Preferred Shares, Series 45
Preferred Shares, Series 46 (1) 500,000 100% of Preferred Shares, Series 46
(1) Preferred Shares, Series 44, Preferred Shares, Series 45, and
Preferred Shares, Series 46 are held by LRCN Trust, a limited recourse trust,
as part of the issuance of LRCN, Series 1, LRCN, Series 2, and LRCN, Series 3.
These shares may only be transferred or distributed to the holders of LRCN in
certain circumstances. Please refer to the "Capital Structure - First
Preferred Shares" section.
Additional information can be found on the page of the Annual Report specified
in the Table of Contents of the Annual Information Form and is incorporated
herein by reference.
NORMAL COURSE ISSUER BID OF THE BANK
The description of the Bank's normal course issuer bid ("NCIB") can be found
in the pages of the Annual Report specified in the Table of Contents of the
Annual Information Form and is incorporated herein by reference.
Shareholders can obtain, free of charge, a copy of the Bank's notice of intent
regarding this NCIB, approved by the TSX, by writing to the Bank's Senior
Vice-President - Legal Affairs and Corporate Secretary at 800 Saint-Jacques
Street, Montreal, Quebec, H3C 1A3 Canada.
DIRECTORS AND EXECUTIVE OFFICERS
Directors
As at October 31, 2024, the following were members of the Board. The main
positions they have held since November 1, 2019, are also specified. All
directors elected at an annual meeting of holders of common shares of the Bank
will hold office until their resignation, the election or appointment of their
replacement, or until the close of the subsequent annual meeting of holders of
Common Shares of the Bank. For further information, please consult the
Circular available on the nbc.ca (https://www.nbc.ca/) website and SEDAR+
(https://www.sedar.com/homepage_en.htm) .
BLOUIN, Pierre ((1) (4) (5)*) Corporate director. Bank director since 2016.
(Quebec, Canada)
BOIVIN, Pierre ((4)*) (Quebec, Canada) Vice-Chair of the Board and Special Advisor of Claridge Inc. since 2024.
President and Chief Executive Officer of Claridge Inc. from 2011 to 2024. Bank
director since 2013.
BURROWS, Scott ((1)) President and Chief Executive Officer of Pembina Pipeline Corporation since
2022. Interim President and Chief Executive Officer of Pembina Pipeline
(Alberta, Canada) Corporation from 2021 to 2022. Chief Financial Officer of Pembina Pipeline
Corporation from 2015 to 2021. Bank director since August 2024.
CHAREST, Yvon ((2) (3)* (4)) Corporate director. Bank director since 2020.
(Quebec, Canada)
CURADEAU-GROU, Patricia ((1) (2)* (5)) Corporate director. Bank director since 2019.
(Quebec, Canada)
FERREIRA, Laurent President and Chief Executive Officer of the Bank since 2021. Chief Operating
Officer of the Bank from February 2021 to October 2021. Executive
(Quebec, Canada) Vice-President and Co-Head - Financial Markets of the Bank from 2018 to 2021.
Bank director since 2021.
GUÉRARD, Annick ((5)) President and Chief Executive Officer of Transat A.T. Inc. since 2021. Chief
Operating Officer of Transat A.T. Inc. from 2017 to 2021. Bank director since
(Quebec, Canada) 2023.
KINSLEY, Karen ((2) (3)) Corporate director. Bank director since 2014.
(Ontario, Canada)
LOEWEN, Lynn ((1)* (2) (5)) Corporate director. Bank director since 2022.
(Quebec, Canada)
MCKILLICAN, Rebecca ((1) (4) (5)) Corporate director. Chief Executive Officer of McKesson Corporation Canada
since from 2020 to 2023. President, Retail Solutions at McKesson Corporation
(Ontario, Canada) Canada from 2019 to 2020. Bank director since 2017.
MELOUL-WECHSLER, Arielle ((4)) Executive Vice-President, Chief Human Resources Officer and Public Affairs of
Air Canada since 2021. Executive Vice-President, Chief Human Resources and
(Quebec, Canada) Communications Officer of Air Canada from 2020 to 2021. Senior Vice-President,
People, Culture and Communications of Air Canada from 2018 to 2020. Bank
director since 2024.
PARÉ, Robert ((3)) Chair of the Board of the Bank since 2023. Strategic Advisor for the law firm
Fasken Martineau DuMoulin LLP from 2018 to 2022. Bank director since 2018.
(Quebec, Canada)
POMERLEAU, Pierre ((2)) Executive Chair of the Board of Directors of Pomerleau Inc. since 2023.
President and
(Quebec, Canada)
Chief Executive Officer of Pomerleau Inc. from 1997 to 2023. Bank director
since 2023.
TALL, Macky ((2) (3)) Partner and Chair of the Global Infrastructure Group of The Carlyle Group
since 2021. Co-Chair of the Infrastructure Group of The Carlyle Group from
(Florida, United States) April 2021 to August 2021. President and Chief Executive Officer of CDPQ Infra
from 2015 to 2020. Bank director since 2021.
(1) Member of the Audit Committee
(2) Member of the Risk Management Committee
(3) Member of the Conduct Review and Corporate Governance Committee
(4) Member of the Human Resources Committee
(5) Member of the Technology Committee
*Chair of the committee
Executive Officers
The following are the Bank's executive officers, as defined in subsection
1.1(1) of Regulation 51-102 Continuous Disclosure Obligation (Quebec), as at
October 31, 2024. The positions they have held both at the Bank and outside
the Bank since November 1, 2019, are also specified:
BLANCHET, Lucie Executive Vice-President - Personal Banking and Client Experience since 2019
(Quebec, Canada)
BONNELL, William Executive Vice-President - Risk Management from June 2012 to October 2024
(Quebec, Canada)
DENHAM, Michael Executive Vice-President - Commercial and Private Banking since 2023
(Quebec, Canada) From 2021 to 2023, Vice-Chair, Commercial Banking and Financial Markets,
National Bank of Canada. From 2015 to 2021, President and Chief Executive
Officer of Business Development Bank of Canada (BDC).
DUBUC, Étienne Executive Vice-President - Financial Markets and Co-President and Co-Chief
Executive Officer, National Bank Financial Inc. since 2024
(Quebec, Canada)
From 2023 to January 2024, Executive Vice-President - Financial Markets,
National Bank of Canada. From November to April 2023, Executive Vice-President
and Co-Head - Financial Markets, National Bank of Canada. From 2020 to 2022,
Executive Vice-President, Managing Director and Head of Equities, National
Bank of Canada. From January 2020 to November 2020, Executive Vice-President,
Managing Director and Head of Equities, Currencies and Commodities, and
Co-Head of Risk Management Solutions, National Bank Financial Inc. From 2018
to 2020, Executive Vice-President and Managing Director, Head of Equities,
National Bank Financial Inc.
GRISÉ, Jean-Sébastien Executive Vice-President and Chief Risk Officer since November 2024
(Quebec, Canada) From 2019 to November 2024, Senior Vice-President - Credit Risk of National
Bank of Canada. From 2016 to 2019, Vice-President - Credit Risk, Commercial,
Retail and Wealth Management, National Bank of Canada.
⃰⃰ Effective November 1, 2024.
FERREIRA, Laurent President and Chief Executive Officer since 2021
(Quebec, Canada) From February 2021 to October 2021, Chief Operating Officer, National Bank of
Canada. From
2018 to 2021, Executive Vice-President and Co-Head - Financial Markets,
National Bank of Canada.
GINGRAS, Marie Chantal Chief Financial Officer and Executive Vice-President - Finance since 2022
(Quebec, Canada) From 2021 to 2022, Senior Vice-President - Financial Accounting, National Bank
of Canada. From 2016 to 2021, Senior Vice-President - Internal Audit, National
Bank of Canada.
HÉBERT, Brigitte Executive Vice-President - Employee Experience since 2019
(Quebec, Canada)
LÉVESQUE, Julie Executive Vice-President - Technology and Operations since 2022
(Quebec, Canada) From 2020 to 2022, Executive Vice-President - Information Technology, National
Bank of Canada. From February 2020 to June 2020, Senior Vice-President - IT
Delivery Strategy, National Bank of Canada. From 2016 to 2020, Managing
Director and Head of System and Data Delivery, Canada Pension Plan Investment
Board.
PAQUET, Nancy Executive Vice-President - Wealth Management and Co-President and Co-chief
Executive Officer, National Bank Financial Inc. since 2023
(Quebec, Canada)
From 2022 to 2023, Senior Vice-President - Personal Banking, National Bank of
Canada. From 2019 to 2022, Senior Vice-President - Savings and Investment
Strategy, Personal Banking, National Bank of Canada.
Shareholdings of Directors and Executive Officers
As at October 31, 2024, all the directors and executive officers of the Bank,
as a group, directly or beneficially owned or controlled 252,635 common
shares, i.e., 0.07% of the Bank's issued and outstanding common shares.
Cease-trading, Bankruptcies, Fines or Sanctions
To the knowledge of the Bank, no director or executive officer was, as of the
date of the Annual Information Form, or has been, during the 10 years prior to
this date, a director or executive officer of a company, including the Bank,
which, while they were acting in such capacity or within a year of their
ceasing to act in such capacity, became bankrupt, made a proposal under
legislation relating to bankruptcy or insolvency, or became subject to, or
instituted any proceedings, arrangement or compromise with creditors, or had a
receiver, receiver manager or trustee appointed to hold their assets.
CONFLICTS OF INTEREST
To the knowledge of the Bank, no director or officer of the Bank has an
existing or potential material conflict of interest with the Bank or any of
its subsidiaries. Information on related party transactions can be found in
the pages of the Annual Report specified in the Table of Contents of the
Annual Information Form and is incorporated herein by reference.
MATERIAL CONTRACTS
With the exception of the information stated in this Annual Information Form,
no material contract for the Bank or its subsidiaries was concluded in 2024 to
date, nor is currently in effect, with the exception of contracts concluded in
the Bank's normal course of activities.
LEGAL PROCEEDINGS AND REGULATORY ACTIONS
Information on litigation to which the Bank is a party can be found in the
pages of the Annual Report specified in the Table of Contents of the Annual
Information Form and is incorporated herein by reference.
TRANSFER AGENT AND REGISTRAR
The Bank's registers are maintained in Montreal by:
Computershare Trust Company of Canada 650 De Maisonneuve Boulevard, 7th Floor
Montreal, Quebec, H3A 3T2 Canada
Telephone: 1-888-838-1407
Fax: 1-888-453-0330
Email: service@computershare.com
(mailto:service@computershare.com)
Website: computershare.com
(https://www.computershare.com/ca/en)
Mailing address:
Computershare Trust Company of Canada 100 University Avenue, 8th Floor
Toronto, Ontario, M5J 2Y1 Canada
INTERESTS OF EXPERTS
Deloitte is the Bank's auditor and is independent within the meaning of the
Code of Ethics of the Ordre des comptables professionnels agréés du Québec.
This firm has prepared the Independent Auditor's Report to shareholders in
respect of the Bank's consolidated financial statements, which comprise the
consolidated balance sheets as at October 31, 2024 and 2023 and the
consolidated statements of net income, the consolidated statements of
comprehensive income, the consolidated statements of changes in equity and the
consolidated statements of cash flows for the years then ended, including the
notes and effectiveness of our internal control over financial reporting as at
October 31, 2024.
INFORMATION ON THE AUDIT COMMITTEE
The mandate of the Audit Committee appears in Appendix B.
Composition of the Audit Committee and Financial Literacy of Members
The Audit Committee is made up entirely of independent directors, as defined
by the CSA. As at October 31, 2024, the members of this committee were Lynn
Lowen (Chair), Pierre Blouin, Scott Burrows, Patricia Curadeau-Grou, and
Rebecca McKillican.
The Board has determined that all the Audit Committee members are "financially
literate" within the meaning of CSA rules relating to audit committees. All
the Audit Committee members have acquired the experience and knowledge
required to adequately fulfill their duties as Audit Committee members, from
having served as chief executive officers or directors of other corporations
or through their education. Several of them serve or have served on the audit
committees of various corporations. The text below summarizes the education
and experience of each Audit Committee member that are relevant to the
performance of their responsibilities.
Pierre Blouin holds a Bachelor of Business Administration degree, with a major
in Finance and Marketing from HEC Montréal and is a Fellow Supply Chain
Management Professional (FSCMP). He has been a director of Fortis Inc. since
2015 and a member of its Governance and Sustainability Committee since 2016
which he has chaired since 2020. He has also been a director of Telecon Inc.
from 2019 to 2024. He was also Chief Executive Officer of Manitoba Telecom
Services Inc. from 2005 to 2014 and served on its Board of Directors from 2006
to 2014. Pierre Blouin also held positions of increasing responsibility at
BCE, including President and Chief Executive Officer of Bell Mobility Inc.
from 2000 to 2002, Chief Executive Officer of BCE Emergis Inc. from 2002 to
2003, and Group President, Consumer Markets of Bell Canada from 2003 to 2005.
Pierre Blouin has been a member of the Audit Committee since April 2017.
Scott Burrows has a Bachelor of Commerce from the University of British
Columbia and is also a CFA(®) Charterholder. He has been President and Chief
Executive Officer and a director of Pembina Pipeline Corporation since 2022.
Previously, Scott Burrows was Chief Financial Officer of Pembina Pipeline
Corporation from 2015 to 2021, overseeing the company's financial operations,
investor relations, treasury, tax, risk management, corporate planning,
corporate development, and capital market financings. Scott Burrows has been a
member and Vice-Chair of the Board of Directors and a member of the Audit
Committee of the Rundle College Society since 2018. Scott Burrows has been a
member of the Audit Committee since August 2024.
Patricia Curadeau-Grou holds a Bachelor of Commerce (Finance and Marketing
option) degree from McGill University and has received the Institute of
Corporate Directors, Director designation. She has been a director of Cogeco
Inc. and a member of its Audit Committee from 2020 to 2024. Since 2015, she
has been a director and a member of the Audit Committee of the
Pointe-à-Callière, Montreal Museum of Archeology and History, which she has
chaired since 2016. She was also a director of Cogeco Communications Inc. from
2012 to 2020. Patricia Curadeau-Grou has held a number of positions at the
Bank from 1991 to 2012, including Chief Financial Officer and Executive
Vice-President - Finance, Risk and Treasury from 2007 to 2011 and Executive
Vice-President - Risk Management from 2011 to 2012. She then became an advisor
to the President until her retirement in October 2015. Patricia Curadeau-Grou
has been a member of the Audit Committee since April 2023.
Lynn Loewen holds a Bachelor of Commerce degree, accounting specialization
from Mount Allison University, is a Fellow of the Chartered Professional
Accountants (FCPA) of Nova Scotia and has received the Institute of Corporate
Directors, Director designation. She has also been a director of Emera
Incorporated and a member of its Audit Committee since 2013. She was a
director of Gildan Activewear Inc. and a member of its Audit Committee in
2024. She was also a director of Xplornet Communications Inc. and a member of
its Audit Committee from 2021 to 2023. She was a member of the Public Sector
Pension Investment Board from 2001 to 2007, where she served on the Audit
Committee from 2003 to 2006 and chaired that committee from 2006 to 2007.
During her career, she held the position of President at Minogue Medical Inc.
from 2015 to 2019, served as President of Expertech Network Installation Inc.
from 2008 to 2011, and was Vice-President of Financial Controls from 2003 to
2005, and Vice-President of Finance Operations from 2005 to 2008 at BCE Inc..
Lynn Loewen has been a member of the Audit Committee since 2022 and has
chaired it since 2023.
Rebecca McKillican has a Bachelor of Business Administration degree from the
Ivey Business School of the University of Western Ontario, a Bachelor of
Software Engineering degree from the University of Western Ontario, and a
Master of Business Administration degree from Harvard Business School. She was
Chief Executive Officer of McKesson Corporation Canada, a Canadian
pharmaceutical distribution company from 2020 to 2023. At the time of her
appointment, she had been President, Retail Solutions since 2019. From 2013 to
2019, she was President and Chief Executive Officer of Well.ca Inc., a leading
e-commerce retailer specializing in health and wellness products. She was
previously a Senior Advisor within the retail and consumer group of private
equity firm Kohlberg Kravis Roberts & Co. L.P., where she worked on making
operational improvements across the firm's portfolio companies, including ESG
initiatives. Rebecca McKillican's solid operational and financial background
has enabled her to lead major strategic growth initiatives in the companies
for which she has worked. She was named New CEO of the Year by The Globe and
Mail's Report on Business in 2021 and was honoured as one of the Top 25
Executives of Toronto for 2023. Rebecca McKillican has been a member of the
Audit Committee since 2024.
GUIDELINES FOR THE MANAGEMENT OF SERVICES PROVIDED BY THE INDEPENDENT AUDITOR AND FEES PAID
The Bank's Audit Committee has put in place guidelines concerning the
management of services that may be provided by the independent auditor to
maintain its independence, which is essential to ensuring the smooth
functioning of the Bank's operations and maintaining the confidence of its
shareholders, investors and the general public. These guidelines have been
prepared taking into account the regulatory framework that governs the Bank
and the independent auditor and frames, among other things, the authorized
services, the conditions for assigning them, and the rotation of partners.
These guidelines state that a mandate may be assigned to the independent
auditor for non-audit services provided the following conditions are met: the
services are not on the list of prohibited services set out in the guidelines;
the specific expertise of the independent auditor or its intrinsic knowledge
of the Bank's activities allows it to carry out the mandate more effectively;
the accepted mandate or the services rendered do not compromise the
independence of the independent auditor within the prevailing regulatory
framework; and the mandate is authorized as per the guidelines. The guidelines
stipulate that the services must be preapproved by the Audit Committee in
accordance with the following conditions: pre-approval policies and procedures
are detailed; the Audit Committee is informed of each non-audit service; and
procedures do not include delegation of the Audit Committee's responsibilities
to Bank management. The Audit Committee has delegated responsibility for
approving the awarding of specific mandates to its Chair. Consequently,
whenever a specific pre-approval is required under these guidelines, Bank
management must consult the Chair of the Audit Committee in the event of
ambiguity, to determine whether a service is included in the pre-approved
services.
Each year, the Audit Committee recommends to the Board that the fees to be
paid to the independent auditor and the envelopes established under the
Guidelines for the Management of Services Provided by the Independent Auditor
be approved. The following table details fees billed by Deloitte to the Bank
and to its subsidiaries for various services rendered during the past two
fiscal years.
2024 2023((1))
($) ($)
Audit fees 6,875,018 6,198,167
Audit-related fees 5,006,482 4,697,537
Subtotal 11,881,500 10,895,704
Tax fees 109,613 177,936
Other fees 1,283,826 535,625
Total 13,274,939 11,609,265
(1) Some amounts have been adjusted to align with the Management Proxy
Circular in respect of the 2023 Annual meeting of holders of common shares.
The audit fees include fees for services related to the audit of the
consolidated financial statements of the Bank and the financial statements of
its subsidiaries or other services normally provided by the independent
auditor in connection with statutory or regulatory filings or engagements
required by applicable legislation. They also include fees for examining the
Bank's interim condensed consolidated financial statements.
The fees for audit-related services include fees for comfort letters,
statutory audits, certification services, consents, the review of documents
filed with regulators, the interpretation of accounting and financial
reporting standards, and the translation of reports to shareholders and
related services performed by the Bank's independent auditor. These services
also include accounting consultations related to divestitures, legislative
and/or regulatory compliance services, as well as the review of certain
internal controls.
Tax fees include fees for assistance in tax planning, during restructurings,
and when taking a tax position, as well as the preparation and review of
income and other tax returns and tax opinions.
All other fees include fees relating to project consulting services, risk
management services and consultations related to acquisitions.
ADDITIONAL INFORMATION
Additional information about the Bank is available on its nbc.ca
(https://www.nbc.ca/) website and on SEDAR+
(https://www.sedar.com/homepage_en.htm) . The Bank's financial information is
published in its Annual Report, which can also be consulted on SEDAR+
(https://www.sedar.com/homepage_en.htm) .
The Bank will provide to any shareholder, free of charge and upon request, a
copy of the Annual Information Form together with a copy of any document
incorporated therein by reference, a copy of the Annual Report, and a copy of
any subsequent interim report; a copy of the Circular and a copy of any
document that is incorporated by reference into a prospectus, short form or
other, whenever the securities of the Bank are part of a distribution.
The Circular contains additional information, such as the compensation and
indebtedness of the directors and executive officers of the Bank and the
securities authorized for issuance under equity compensation plans. Copies of
these documents may be obtained upon request from the Bank's Senior
Vice-President - Legal Affairs and Corporate Secretary at 800 Saint-Jacques
Street, Montreal, Quebec, H3C 1A3 Canada.
As part of the Canadian bank resolution powers, certain provisions of, and
regulations under the Act, the Canada Deposit Insurance Corporation Act and
certain other Canadian federal statutes pertaining to banks, provide for a
bank recapitalization regime for banks designated by OSFI as domestic
systemically important banks, which include the Bank.
A description of Canadian bank resolution powers and resulting risk factors
for certain elements of the Bank's liabilities can be found in the pages of
the Annual Report specified in the Table of Contents of the Annual Information
Form and is incorporated herein by reference, and at:
https://www.nbc.ca/content/dam/bnc/a-propos-de-nous/relations-investisseurs/fonds-propres-et-dette/bail-in_senior_debt_en.pdf
(https://www.nbc.ca/content/dam/bnc/a-propos-de-nous/relations-investisseurs/fonds-propres-et-dette/bail-in_senior_debt_en.pdf)
The information available on the Bank's website is not incorporated herein by
reference as part of this Annual Information Form.
APPENDIX A - EXPLANATION OF CREDIT RATINGS
The following descriptions of the ratings categories assigned by each of the
rating agencies are provided in accordance with legislation and were taken
from the agencies' respective websites. They do not constitute an endorsement
by the Bank of the categories or of the application by the respective rating
agencies of their criteria and analyses. More information can be obtained from
the respective rating agencies.
Moody's
Short-Term Debt: P-1
A "P-1" rating indicates a superior ability to repay short-term debt
obligations.
Long-Term Debt: Aa3
An "Aa" is judged to be of high quality and subject to very low credit risk.
Long-Term Non Bail-inable Senior Debt: Aa3
An "Aa" is judged to be of high quality and subject to very low credit risk.
Senior Debt: A3
An "A" rating is considered upper-medium-grade and is subject to low credit
risk.
Subordinated Debt: Baa2
A "Baa" rating is considered to be medium grade, but subject to moderate
credit risk and as such may possess certain speculative characteristics.
NVCC Subordinated Debt: Baa2 (hyb)
A "Baa" rating is considered to be medium grade, but subject to moderate
credit risk and as such may possess certain speculative characteristics.
NVCC Limited Recourse Capital Notes: Ba1 (hyb)
A "Ba" rating is considered to have speculative elements and subject to
substantial credit risk.
NVCC Preferred Shares: Ba1 (hyb)
A "Ba" rating is considered to have speculative elements and subject to
substantial credit risk.
Counterparty Risk: Aa3/P-1
An "Aa" is judged to be of high quality and subject to very low credit risk. A
"P-1" rating indicates a superior ability to repay short- term debt
obligations.
Covered Bonds Program: Aaa
An "Aaa" rating is judged to be of the highest quality, with the lowest credit
risk.
Other Information
Moody's assigns ratings of between "P-1" and "NP" to short- term obligations
with initial maturities of 13 months or less, which reflect both the
probability of default and the expected financial loss in the event of
default.
Moody's assigns ratings of between "Aaa" and "C" to long- term financial
instruments, to issuers or to obligations with initial maturities of one year
or more, which reflect both the probability of default and the expected
financial loss in the event of default.
Moody's appends numerical modifiers "1," "2" and "3" to each generic rating
classification from "Aa" through "Caa." The modifier "1" indicates that the
obligation ranks in the higher end of its generic rating classification; the
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a
ranking in the lower end of that generic rating classification. Moreover, the
addition of "(hyb)" after the rating indicates a hybrid security.
S&P
Short-Term Senior Debt: A-1
An "A-1" rating is in the highest category and it indicates that the obligor's
capacity to meet its financial commitment on the obligation is strong.
Canadian Commercial Paper: A-1 (Mid)
An obligation rated "A-1 (Mid)" on the Canadian commercial paper rating scale
corresponds to an "A-1" rating on Standard & Poor's global short-term
rating scale. This rating reflects a strong capacity for the obligor to meet
its financial commitment on the obligation.
Long-Term Non Bail-inable Senior Debt: A+
An "A" rating is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment
is still strong.
Senior Debt: BBB+
A "BBB" rating exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Subordinated Debt: BBB+
A "BBB" rating exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
NVCC Subordinated Debt: BBB
A "BBB" rating exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
NVCC Limited Recourse Capital Notes: BB+
A "BB" rating is less vulnerable to nonpayment than other speculative issues.
However, it faces major ongoing uncertainties and exposure to adverse
business, financial, or economic conditions that could lead to the obligor's
inadequate capacity to meet its financial commitments.
NVCC Preferred Shares: P-3 (High)
A "P-3 (High)" rating corresponds to a "BB+" rating on Standard & Poor's
Global Scale Preferred Share Rating. A "BB" rating is considered less
vulnerable in the near term than other lower-rated obligors. However, it faces
major ongoing uncertainties and exposure to adverse business, financial, or
economic conditions that could lead to the obligor's inadequate capacity to
meet its financial commitments.
Other Information
The ratings from "AAA" to "CCC" may be modified by adding a plus or minus sign
to show relative standing within the major rating categories.
DBRS
Short-Term Debt: R-1 (high)
An "R-1 (high)" rating indicates the highest credit quality, and the capacity
for the payment of short-term financial obligations is exceptionally high. It
is unlikely that securities rated "R-1 (high)" will be vulnerable to future
events.
Long-Term Debt: AA
An "AA" rating indicates superior credit quality, and the capacity for the
payment of financial obligations is considered high. The "AA" rating only
differs slightly from "AAA," and it corresponds to securities that are
unlikely to be significantly vulnerable to future events.
Long-Term Non Bail-inable Senior Debt: AA
An "AA" rating indicates superior credit quality, and the capacity for the
payment of financial obligations is considered high. The "AA" rating only
differs slightly from "AAA," and it corresponds to securities that are
unlikely to be significantly vulnerable to future events.
Senior Debt: AA (low)
An "AA" rating indicates superior credit quality, and the capacity for the
payment of financial obligations is considered high. The "AA" rating only
differs slightly from "AAA," and it corresponds to securities that are
unlikely to be significantly vulnerable to future events.
Subordinated Debt: A (high)
An "A" rating indicates good credit quality and a substantial capacity for the
payment of financial obligations, but of lesser strength than securities rated
"AA." May be vulnerable to future events, but negative factors are considered
manageable.
NVCC Subordinated Debt: A (low)
An "A" rating indicates good credit quality and a substantial capacity for the
payment of financial obligations, but of lesser strength than securities rated
"AA." May be vulnerable to future events, but negative factors are considered
manageable.
NVCC Limited Recourse Capital Notes: BBB (high)
A "BBB" rating indicates adequate credit quality, and the capacity for the
payment of financial obligations is considered acceptable. Securities rated
"BBB" may be vulnerable to future events.
NVCC Preferred Shares: Pfd-2
A "Pfd-2" rating indicates satisfactory credit quality. Protection of
dividends and principal is still substantial, but earnings, the balance sheet,
and coverage ratios are not as strong as "Pfd-1" rated securities. Generally,
"Pfd-2" ratings correspond with companies whose senior bonds are rated in the
"A" category.
Covered Bonds Program: AAA
An "AAA" rating is of the highest credit quality. The capacity for the payment
of financial obligations is exceptionally high and unlikely to be adversely
affected by future events.
Other Information
The "R-1" and "R-2" rating categories can be further qualified with the
subcategories "high," "middle" and "low." All long-term rating categories
other than AAA and D also contain the subcategories "high" and "low." The
absence of either designation indicates that the rating is in the middle of
the category.
Fitch
Short-Term Debt: F1+
An "F1" rating indicates the lowest default risk and the strongest capacity
for timely payment of financial commitments. A "+" is added to the rating to
indicate a particularly strong liquidity profile.
Long-Term Debt: AA-
An "AA" rating denotes expectations of very low default risk. The capacity for
payment of financial commitments is considered very strong. This capacity is
not significantly vulnerable to foreseeable events.
Long-Term Non Bail-inable Senior Debt: AA-
An "AA" rating denotes expectations of very low default risk. The capacity for
payment of financial commitments is considered very strong. This capacity is
not significantly vulnerable to foreseeable events.
Senior Debt: A+
An "A" rating denotes expectations of low default risk. The capacity for
payment of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to adverse business or economic conditions
than is the case for higher ratings.
Subordinated Debt: A-
An "A" rating denotes expectations of low default risk. The capacity for
payment of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to adverse business or economic conditions
than is the case for higher ratings.
NVCC Limited Recourse Capital Notes: BBB
A "BBB" rating denotes good prospects for ongoing viability. There is a
moderate level of default risk relative to other issuers or obligations in the
same country or monetary union.
Derivative Counterparty Rating: AA-
An "AA" rating denotes expectations of very low default risk. The capacity for
payment of financial commitments is considered very strong. This capacity is
not significantly vulnerable to foreseeable events.
Covered Bonds Program: AAA
An "AAA" rating denotes the lowest expectations of default risk. It is
assigned only in cases of exceptionally strong capacity for the payment of
financial commitments. It is very unlikely that this capacity will be
adversely affected by foreseeable events.
Other Information
The modifiers "+" or "-" may be appended to a rating to specify relative
status within major rating categories.
APPENDIX B - AUDIT COMMITTEE MANDATE
Audit Committee
The Bank's Board of Directors ("Board") delegates some of its powers to
several committees. This document describes the mandate of the Audit Committee
("Committee"). The Committee oversees the Bank's financial soundness and
ensures that practices to this effect are robust and that they comply with the
Bank's One Mission as well with legislation. It performs its activities in
accordance with the Bank's environmental, social and governance practices and
strategies.
Among the activities it performs as part of its mandate, the Committee:
· Obtains reports on the Bank's management and financial position, the
effectiveness and efficiency of the main governance processes and systems, the
management of risks and internal controls and the financial risks it faces.
· Reviews the recommendations for addressing such risks and follows up
on the recommendations implemented.
· Ensures that Management has implemented the appropriate internal
controls.
· Recommends to the Board the independent auditor candidate who will be
proposed to shareholders.
The Committee delegates certain responsibilities to Bank resources or
independent third parties, such as to the Finance and Internal Audit oversight
functions and to the independent auditor:
· The Finance oversight function: Reporting to the Chief Financial
Officer and Executive Vice-President, Finance, the Finance oversight function
oversees the management of financial resources and the governance of financial
information. It helps the Bank sectors manage their financial performance,
ensures compliance with regulatory requirements and is responsible for
presenting the Bank's information to shareholders.
· The Internal Audit oversight function: The Senior Vice-President,
Internal Audit is responsible for objectively providing independent assurance
and advice to the Committee, the Board and Bank Management on the efficiency
of the main governance processes and systems and on the management of risks
and internal controls, as well as offering recommendations and advice for
promoting the Bank's long-term strength.
· The independent auditor: The independent auditor expresses an
opinion on the consolidated financial statements and provides reports. It
makes recommendations for improving the Bank's internal controls.
Moreover, the Committee:
· Oversees their performance and independence.
· Ensures that Management has implemented the measures and procedures
to provide quality financial information.
· Obtains information about any situation that could jeopardize the
Bank's financial soundness.
· Examines any document under its responsibility by law, regulation
or submitted by any regulatory authority.
1 Role and responsibilities
1.1 Appointment and Mandate of Oversight Functions and the Independent Auditor
Independent auditor
Appointment
· The Committee evaluates the independent auditor candidates. It
periodically considers whether it is appropriate to launch a call for tenders
in order to select a candidate firm to act as independent auditor.
· It proposes the appointment of the independent auditor. It recommends
the appointment to the Board, which submits it to a shareholder vote.
· The Committee also makes recommendations concerning the independent
auditor's compensation.
· The Committee can recommend the removal of the independent auditor.
Mandate and annual plan
· The Committee approves the annual plan and the engagement letter
which sets out the conditions and scope of services provided by the
independent auditor.
· It ensures that the scope of the plan is appropriate, namely that it
is based on financial and other material risks.
· In the event of any substantial change to the annual plan, the
Committee assesses, with the support of the independent auditor, whether the
change could adversely affect the quality of the audit engagement.
· The Committee must preapprove the audit and any other mandates of the
independent auditor and put in place clear procedures and conditions for
assigning those and any other mandates:
o Guideline: Each year, the Committee recommends to the Board of Directors
that it approve the guidelines concerning the management of the services
provided by the independent auditor.
o Delegation: The Committee delegates to its Chair the power to approve
these mandates.
Oversight function heads
Appointment of the Chief Financial Officer and Executive Vice-President, Finance and of the Senior
Vice-President, Internal Audit
· The Committee reads over the recommendations of the President and
Chief Executive Officer of the Bank concerning the appointment or replacement
of the Senior Vice-President, Internal Audit and the Chief Financial Officer
and Executive Vice-President, Finance. The Committee then makes its
recommendations to the Board.
· Once a year, the Committee reads over the succession plans for the
Senior Vice-President, Internal Audit and the Chief Financial Officer and
Executive Vice-President, Finance. The Committee then makes its
recommendations to the Board.
Mandate and annual plan
· Each year, the Committee reviews and approves the Internal Audit
Charter and the mandate of the Finance oversight function.
· Each year, the Committee reviews and approves the Annual Internal
Audit Plan and makes recommendations as necessary.
· The Committee ensures that the oversight functions have the necessary
and appropriate resources and structure to fulfill their mandate.
· The Committee approves the budgets of the oversight functions
annually.
1.2 Performance, Oversight and Independence of the Oversight Functions
and the Independent Auditor
Independent auditor
Self-assessment
At least once a year, the independent auditor presents a report outlining:
· Its internal practices concerning the quality control of its
services.
· Important matters arising from its most recent quality control and
peer reviews or following investigations by professional or government
authorities in the previous five years regarding its engagement and the
measures taken to settle such matters.
· Its assessment and internal procedures for ensuring its independence.
· Its business relationship with the Bank.
Annual assessment by the Bank
· Before the independent auditor tables its report on the annual
consolidated financial statements, the Committee formally assesses the
effectiveness of the contribution of the independent auditor, as well as its
competencies, resources, independence, support and communication skills.
· The Committee reports to the Board on the effectiveness of the
independent auditor.
Periodic assessment by the Bank
· The Committee periodically assesses the overall performance of the
independent auditor for all provided services. It is supported by Management
and the recommendation of the Bank's Senior Vice-President, Internal Audit.
· At least once every five years, the Committee conducts a full
assessment of the independent auditor in accordance with the recommendations
of CPA Canada and the Canadian Public Accountability Board.
Rotation of partners responsible for the engagement
· The Committee reviews the competencies, performance and independence
of the partner responsible for the audit and the audit team.
· The Committee discusses the appropriate time and procedure for
rotating each of its partners.
Chief Financial Officer and Executive Vice-President, Finance and Senior
Vice-President, Internal Audit
Assessment of independence
· The Committee ensures the independence and effectiveness of Internal
Audit and the Finance oversight functions. To fulfill this role, it ensures
that these oversight functions are free of any influence that could adversely
affect their ability to carry out their responsibilities objectively. The
Committee also ensures that these oversight functions have sufficient stature
and authority within the Bank.
· The Chief Financial Officer and Executive Vice-President, Finance
reports to the President and Chief Executive Officer of the Bank and has
direct access to the Committee Chair.
· To ensure the independence of the Internal Audit oversight function,
the Committee ensures:
o That he reports in an administrative capacity to the President and Chief
Executive Officer.
o That he has direct access to the Committee Chair and the President and
Chief Executive Officer of the Bank.
o That he has access to the required information.
o That he regularly meets with the Chair of the Committee without Management
presence in order to review matters raised concerning relations with the
Bank's Management and access to required information.
Performance assessment, compensation and oversight
· The Committee periodically assesses the effectiveness of the Finance
and Internal Audit oversight functions, as well as their oversight processes.
To fulfill this role, with the assistance of independent external consultants,
it benchmarks the Finance and Internal Audit's oversight functions and
processes.
· The Committee annually reviews the performance of the Senior
Vice-President, Internal Audit and the Chief Executive Officer and Executive
Vice-President, Finance, and helps determine their compensation. The Committee
then makes its recommendations to the Board.
1.3 Financial Information
Integrity of financial information
· The Committee reviews, together with the independent auditor, the
consolidated financial statements, the Annual Report and the Annual
Information Form, and ensures that they accurately present the Bank's
financial performance and cash flows.
o Approval: It recommends that the Board approve them before they are
published, after looking over the independent auditor's conclusions.
· The Committee continuously oversees the independent auditor's work,
which may include conclusions regarding the financial statements, reviews,
certifications and other services.
· In the event of disagreements between the independent auditor and
Management regarding financial information, the Committee may intervene to
reach an agreement.
· The Committee, the independent auditor and Management discuss
documents related to the integrity of financial information and any other
concerns the independent auditor may have.
· The Committee and the independent auditor discuss the quality and
acceptability of the accounting principles applied in preparing the
consolidated financial statements.
· The Committee reviews the annual management letter from the
independent auditor and follows up on the corrective action taken by
Management.
· The Committee obtains all important correspondence between the
independent auditor and Management regarding audit findings.
Financial reporting
· The Committee reviews the press releases concerning financial
information, audit processes and management information systems. It ensures
their integrity, the effectiveness of processes, and compliance with
applicable accounting standards.
· It reviews the process where the President and Chief Executive
Officer and the Chief Financial Officer certify the integrity of the financial
statements.
· It reviews disclosures on environmental, social and governance
factors, including climate-related disclosures contained in financial reports.
· The Committee ensures that adequate procedures are in place for
publicly disclosing information derived from the financial statements.
1.4 Review of the Bank's Financial Soundness
Annual budget and financial plan
· The Committee reviews and recommends to the Board the Bank's
operating budget, which contains information on economic outlooks,
consolidated and sectorial financial objectives, operating expenses and the
capital budget.
Investments and transactions
· The Committee is made aware of any investment or transaction having a
material effect on the Bank's financial position brought to its attention by
Internal Audit, the independent auditor or a member of Management.
Disputes and claims
· The Committee looks over all reports from Management regarding any
dispute, notice of assessment or claim that could adversely affect the Bank's
financial position.
· It ensures that material claims are properly disclosed in the
financial statements.
Taxation
· The Committee reads over any reports relating to tax planning and
risks.
Dividends
· The Committee reviews the declaration of dividends and makes
recommendations to the Board.
1.5 Control Mechanisms and Reporting
Internal Audit reports
· Reviews the report of the Senior Vice-President, Internal Audit,
discusses the main audit reports, and ensures that the necessary steps are
taken to follow up on important report recommendations.
Reporting of irregularities related to accounting, auditing or internal
controls
· The Committee reviews and reports to the Board any accounting or
financial irregularities reported anonymously by employees or directors.
· It ensures that the Whistleblowing Policy (accounting, internal
accounting controls, audit and wrongdoing) on reporting irregularities and
adequate procedures are implemented for the receipt, retention and handling of
irregularities reported and the confidential submission of concerns relating
to accounting, auditing matters or internal controls. This policy is reviewed
periodically.
· It reviews the results of investigations led by Internal Audit as
well as the concerns and recommendations brought forth by this function. The
Committee renders a decision following an investigation led by Internal Audit
and communicates it with respect to the policy.
1.6 Continued Education
· The Committee is informed of changes to accounting standards that
could have an impact on the Bank or its consolidated financial statement's
disclosure.
· The Committee also stays informed of legislative, auditing and
financial reporting changes.
· It informs the Board of such changes or new developments.
· To stay informed on matters relating to its mandate, the Committee
attends information sessions on matters that fall under its expertise.
1.7 Banks' Subsidiaries
· The Committee acts as an Audit Committee for Natcan Trust Company in
accordance with the Trust and Loan Companies Act (Canada), notably for the
approval of the consolidated financial statements and the appointment of the
independent auditor.
· The Committee may also act as Audit Committee for any other
subsidiary of the Bank where permitted under its incorporating act. As such,
it fulfills all the duties falling upon such committee, in accordance with
legislation.
2 Powers
2.1 Hiring Independent External Consultants
· The Committee may hire legal advisors or other independent external
consultants to assist it in fulfilling its responsibilities.
· The Committee sets and pays its consultants' compensation. The Bank
provides the funds necessary to pay for the services provided by these
consultants.
2.2 Investigating and Having Access to the Books, Registries, Premises, Officers and Employees
· The Committee may investigate any issue it deems relevant. To conduct
its investigation, it may have full access to the Bank's books, registries,
premises, officers and employees.
2.3 Delegating Powers to a Sub-committee
· The Committee may, at its discretion, designate a sub-committee to
review any issue raised by the current mandate.
2.4 Contacting Officers and Employees Directly
· The Committee may contact the independent auditor, the Senior
Vice-President - Internal Audit, the Chief Financial Officer and Executive
Vice-President - Finance, the Chief Accounting Officer and Senior
Vice-President - Accounting, Consolidation and Disclosure, the Chief
Compliance Officer and any other Bank officer or employee directly.
2.5 Performing any Duties Assigned to it or Stipulated by Law
· The Committee performs any duty required by the legislation in effect
or any duty assigned to it by the Board from time to time.
· The Committee submits to the Board all recommendations it deems
appropriate with respect to matters that fall within its purview.
3 Composition
3.1 Composition of the Committee
· Appointed by the Board and composed of Board directors
· Minimum of three members
· A majority of the members consists of directors who are not
affiliated with the Bank; no employee or officer of the Bank or one of its
subsidiaries may therefore be part of it.
· Members appointed by the Board upon recommendation from the Committee
· One Chair, appointed by the Board from among the Committee members
· One secretary, who is the secretary of the Bank, an assistant
secretary or any other person designated by the secretary of the Bank
· The composition of the Committee is reviewed each year
Overboarding
· Members of the Committee will not serve on more than three public
corporation audit committees, including the Bank's, without the approval of
the Board.
3.2 Chair of the Committee
· The duties of the Committee Chair are set out in the mandate of the
Chairs. The Committee Chair may ask the Chair of the Board to have certain
matters for which the Committee is responsible submitted to the Board.
3.3 Selection Criteria for Committee Members
Have the required skills and knowledge
· Each of the Committee members is "financially literate" within the
meaning of Regulation 52-110 respecting Audit Committees or is able to become
financially literate within a reasonable period of time following his
appointment.
Be independent
· Every member must be independent as defined by the Canadian
Securities Administrators.
3.4 Term of Mandate for Committee Members
Duration
All members carry out their duties until a successor is appointed, or until
they:
· resign
· are relieved of their duties
· no longer sit as Board directors
Replacing a member after their departure during the year (vacancy)
· A vacancy on the Committee is filled by the Board as it deems
appropriate.
· If it does not appoint a new member and the Committee has the
required minimum number of members, the Committee's decisions will be valid.
4 Meetings
4.1 Dates of Meetings
Regular meetings scheduled in advance
· At least one meeting per quarter
· Dates, times, goals and locations of meetings are set in advance by
the Board for the entire year. This information is sent to members at the
beginning of the year. No other notice is sent.
Unscheduled meetings called during the year (as needed)
Who may call them?
· Unscheduled meetings may be called by:
o The Chair of the Committee
o Any other Committee member
o The Chair of the Board
o The President and Chief Executive Officer
o The Chief Financial Officer and Executive Vice-President, Finance
o The Senior Vice-President, Internal Audit
Date, time and location of such a meeting
· The date, time, goal and location of the meeting are sent by any
means of communication, without any required additional notice. The notice
also states the purpose of the meeting.
Notice of meeting required unless exception:
· 24-hour notice: Members must be advised about an unscheduled meeting
no less than 24 hours before the time and date set for the meeting.
· Waiver of notice: The presence of a member at a meeting constitutes a
waiver of this notice of meeting, except if this member is present to
specifically oppose the review of any issue, claiming that the meeting was not
called in due form.
· Exception No. 1 - Two-hour notice: The notice may be sent two hours
in advance if there is an emergency called by the Chair of the Board, the
Chair of the Committee or the President and Chief Executive Officer.
· Exception No. 2 - Without notice: An unscheduled Committee meeting
may be held without notice when all Committee members are present or when the
absent members provide a written waiver of notice of the meeting.
Exceptional meetings of the Board to review matters of interest to the Committee
· The Committee Chair may call a meeting of the Board to discuss
matters of interest to the Committee.
4.2 Attendance: in person or remotely
· Meetings may be held by telephone or via any other means that enable
all members to communicate with each other adequately and simultaneously. The
person participating remotely is presumed to be in attendance.
4.3 Individuals who may be Invited to Meetings
President and Chief Executive Officer
· He or she may attend every meeting of the Committee.
Independent Auditor
· He or she is entitled to receive the notices for Committee meetings,
attend discussions involving related parties and express their opinion.
Any other person invited by the Committee
· They can attend part of or the entire meeting, based on what has been
agreed with the Committee.
In camera meeting
· Part of the meeting must always take place in the absence of the
President and Chief Executive Officer or any other Bank officer.
4.4 Minimum Number of Members to hold a Meeting of the Committee (quorum)
· A majority of the Committee members must be present: If a member is
temporarily absent from a meeting because the topic discussed puts them in a
conflict of interest, they will be considered to be present for the meeting
(subsection 182(3) of the Bank Act).
· Not enough members present for quorum? The Committee Chair can ask
the Chair of the Board to act as a member of the Committee for this meeting
and give them voting rights unless the Chair of the Board is already a member
of the Committee.
· Is the Chair unavailable to attend? The Committee selects a Chair
from members present at the meeting or asks the Chair of the Board to chair
the meeting.
4.5 Vote
· All decisions to be made by the Committee must be voted on.
· Majority vote: The decisions voted on by the Committee must be
approved by a majority vote of the members present.
· Unanimous vote if the meeting only includes two members: If the
Committee is composed of three members and only two members attend a meeting,
the decisions to be voted on must be passed unanimously.
4.6 Minutes of the Meeting
· Minutes: The secretary is responsible for drafting the minutes after
each Committee meeting. These must be approved by Committee members before
being filed with the records of minutes. These minutes are provided to all
directors at the next Board meeting for information purposes.
· Oral report of the Chair to the Board: The Committee Chair must
present an oral report on the deliberations and recommendations of the
Committee at the next Board meeting.
Approved by the Committee and the Board on August 27, 2024.
® NATIONAL BANK and the NATIONAL BANK logo are registered trademarks of
National Bank of Canada.
© NATIONAL BANK OF CANADA, 2024. All rights reserved. Any reproduction, in
whole or in part, is strictly prohibited without prior written consent of
National Bank of Canada.
1 (#_ftnref1) Also consult the material change report concerning the
acquisition of Canadian Western Bank, available on SEDAR+ (sedarplus.ca).
2 (#_ftnref2) 2023 Fiscal results have been adjusted to reflect accounting
policy changes arising from the adoption of IFRS 17. For additional
information, see Note 2 to these audited consolidated financial statements.
3 (#_ftnref3) The information on capital management measures can be found in
the pages of the Annual Report specified in the Table of Contents of the
Annual Information Form and is incorporated herein by reference.
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