REG - Nat Bank of Canada - Annual Report 2024 (MD&A) Part 1
04/12/2024 16:30
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RNS Number : 8421O National Bank of Canada 04 December 2024
Regulatory Announcement
RNS Number: 8421O
National Bank of Canada
December 4, 2024
2024 Management's Discussion and Analysis (Part 1)
National Bank of Canada (the "Bank") announces publication of its 2024 Annual
Report, including the Management's Discussion and Analysis thereon
(the "2024 MD&A"). The 2024 MD&A 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 as part of the 2024 Annual Report 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 MD&A, the 2024 Annual Report and the 2024
Annual CEO and CFO Certifications please click on the following link:
http://www.rns-pdf.londonstockexchange.com/rns/8421O_1-2024-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8421O_1-2024-12-4.pdf)
http://www.rns-pdf.londonstockexchange.com/rns/8421O_2-2024-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8421O_2-2024-12-4.pdf)
http://www.rns-pdf.londonstockexchange.com/rns/8421O_3-2024-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8421O_3-2024-12-4.pdf)
Management's Discussion
and Analysis
December 3, 2024
The following Management's Discussion and Analysis (MD&A) presents the
financial condition and operating results of National Bank of Canada (the
Bank). This analysis was prepared in accordance with the requirements set out
in National Instrument 51-102, Continuous Disclosure Obligations, released by
the Canadian Securities Administrators (CSA). It is based on the audited
annual Consolidated Financial Statements for the year ended October 31, 2024
(the Consolidated Financial Statements) and prepared in accordance with
International Financial Reporting Standards (IFRS(®) Accounting Standards) as
issued by the International Accounting Standards Board (IASB), unless
otherwise indicated. IFRS Accounting Standards represent Canadian generally
accepted accounting principles (GAAP). This MD&A should be read in
conjunction with the Consolidated Financial Statements and accompanying notes
for the year ended October 31, 2024. All amounts are presented in Canadian
dollars. Additional information about the Bank, including the Annual
Information Form, can be obtained from the Bank's website at nbc.ca and
SEDAR+'s website at sedarplus.ca. The information found in the various
documents and reports published by the Bank or the information available on
the Bank's website and mentioned herein is not and should not be considered
incorporated by reference into the 2024 Annual Report, the Management's
Discussion and Analysis, or the Consolidated Financial Statements, unless
expressly stated otherwise.
Financial Reporting Method 14 Quarterly Financial Information 48
Financial Disclosure 20 Analysis of the Consolidated Balance Sheet 49
Overview 21 Securitization and Off-Balance-Sheet Arrangements 53
Financial Analysis 25 Capital Management 55
Business Segment Analysis 28 Risk Management 65
Personal and Commercial 29 Material Accounting Policies and Accounting Estimates 113
Wealth Management 33 Accounting Policy Changes 118
Financial Markets 37 Future Accounting Policy Changes 119
U.S. Specialty Finance and International (USSF&I) 42 Additional Financial Information 120
Other 47 Glossary 130
Caution Regarding Forward-Looking Statements
Certain statements in this document 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
may include, but are not limited to, statements in the messages from
management, as well as other statements about the economy, market changes, the
Bank's objectives, outlook, and priorities for fiscal 2025 and beyond, the
strategies or actions that the Bank will take 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 (CWB) and
the impacts and benefits of this transaction, and certain risks to which the
Bank is exposed. The Bank may also make forward-looking statements in 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", the use of 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 at the dates indicated and for the periods then ended, 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 that the
Bank deems 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 will 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 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 possibility that the proposed transaction may fail to materialize
or may not materialize within the time periods anticipated, the failure to
obtain the required approvals 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 the 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 to fiscal, monetary, and other public
policies; regulatory oversight and changes to regulations that affect the
Bank's business; geopolitical and sociopolitical uncertainty; climate change,
including physical risks and risks related to the transition to a low-carbon
economy; the Bank's ability to meet stakeholder expectations on environmental
and social issues, the need for active and continued stakeholder engagement;
the availability of comprehensive and high-quality information from customers
and other third parties, including greenhouse gas emissions; the ability of
the Bank to develop indicators to effectively monitor our progress; 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 ability of the Bank to recruit and retain key
personnel; technological innovation, including open banking and the use 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 issues or litigation; changes made
to the accounting policies used by the Bank to report its financial position,
including the uncertainty related to assumptions and significant accounting
estimates; changes to tax legislation in the countries where the Bank
operates; changes to capital and liquidity guidelines as well as to the
instructions related 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 by third parties to fulfil
their obligations to the Bank; the potential impacts of disruptions to the
Bank's information technology systems due to cyberattacks and theft or
disclosure of data, including personal information and identity theft; the
risk of fraudulent activity; and possible impacts of major events on 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 ability of the Bank 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 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
2024 Annual Report and may be updated in the quarterly reports to
shareholders filed thereafter.
Financial Reporting Method
The Bank's Consolidated Financial Statements are prepared in accordance with
IFRS Accounting Standards, as issued by the IASB. The financial statements
also comply with section 308(4) of the Bank Act (Canada), which states that,
except as otherwise specified by the Office of the Superintendent of Financial
Institutions (Canada) (OSFI), the Consolidated Financial Statements are to be
prepared in accordance with IFRS Accounting Standards, which represent
Canadian GAAP. None of the OSFI accounting requirements are exceptions to IFRS
Accounting Standards.
The presentation of segment disclosures is consistent with the presentation
adopted by the Bank for the fiscal year beginning November 1, 2023. This
presentation reflects the retrospective application of accounting policy
changes arising from the adoption of IFRS 17 - Insurance Contracts (IFRS 17).
For additional information, see Note 2 to the Consolidated Financial
Statements. The figures for fiscal 2023 have been adjusted to reflect these
accounting policy changes.
Non-GAAP and Other Financial Measures
The Bank uses a number of financial measures when assessing its results and
measuring overall performance. Some of these financial measures are not
calculated in accordance with GAAP. Regulation 52-112 Respecting Non-GAAP and
Other Financial Measures Disclosure (Regulation 52-112) prescribes disclosure
requirements that apply to the following measures used by the Bank:
· non-GAAP financial measures;
· non-GAAP ratios;
· supplementary financial measures;
· capital management measures.
Non-GAAP Financial Measures
The Bank uses non-GAAP financial measures that do not have standardized
meanings under GAAP and that therefore may not be comparable to similar
measures used by other companies. Presenting non-GAAP financial measures helps
readers to better understand how management analyzes results, shows the
impacts of specified items on the results of the reported periods, and allows
readers to better assess results without the specified items if they consider
such items not to be reflective of the underlying performance of the Bank's
operations. In addition, the Bank uses the taxable equivalent basis to
calculate net interest income, non-interest income, and income taxes. This
calculation method consists in grossing up certain revenues taxed at lower
rates (notably dividends) by the income tax to a level that would make it
comparable to revenues from taxable sources in Canada. An equivalent amount is
added to income taxes. This adjustment is necessary in order to perform a
uniform comparison of the return on different assets irrespective of their tax
treatment. However, in light of the enacted legislation with respect to
Canadian dividends, the Bank did not recognize an income tax deduction nor did
it use the taxable equivalent basis method to adjust revenues related to
affected dividends received after January 1, 2024 (for additional information,
see the Income Taxes section).
The key non-GAAP financial measures used by the Bank to analyze its results
are described below, and a quantitative reconciliation of these measures is
presented in the tables in the Reconciliation of Non-GAAP Financial Measures
section on pages 18 to 20 and in the Consolidated Results table on page 25.
It should be noted that, for the year ended October 31, 2024, after the
agreement to acquire Canadian Western Bank (CWB) was concluded, several
acquisition-related items have been excluded from results since, in the
opinion of management, they are not reflective of the underlying performance
of the Bank's operations, in particular, the amortization of the subscription
receipt issuance costs of $14 million ($10 million net of income taxes); a
gain of $174 million ($125 million net of income taxes) resulting from the
remeasurement at fair value of the CWB common shares already held by the Bank;
the impact of managing fair value changes, which is a loss of $3 million
($2 million net of income taxes); and acquisition and integration charges of
$18 million ($13 million net of income taxes). For the year ended October
31, 2023, the following items were excluded from results: a $91 million gain
($67 million net of income taxes) related to the fair value remeasurement of
an equity interest; impairment losses of $86 million ($62 million net of
income taxes) on intangible assets and premises and equipment; litigation
expenses of $35 million ($26 million net of income taxes); a $25 million
expense ($18 million net of income taxes) related to the retroactive impact of
changes to the Excise Tax Act; provisions for contracts of $15 million ($11
million net of income taxes); and a $24 million income tax expense related to
the Canadian government's 2022 tax measures.
Adjusted Net Interest Income
This item represents net interest income on a taxable equivalent basis and
excluding specified items, if any. A taxable equivalent is added to net
interest income so that the performance of the various assets can be compared
irrespective of their tax treatment, and specified items, if any, are excluded
so that net interest income can be better evaluated by excluding items that
management believes do not reflect the underlying financial performance of the
Bank's operations.
Adjusted Non-Interest Income
This item represents non-interest income on a taxable equivalent basis and
excluding specified items, if any. A taxable equivalent is added to
non-interest income so that the performance of the various assets can be
compared irrespective of their tax treatment, and specified items, if any, are
excluded so that non‑interest income can be better evaluated by excluding
items that management believes do not reflect the underlying financial
performance of the Bank's operations.
Adjusted Total Revenues
This item represents total revenues on a taxable equivalent basis and
excluding specified items, if any. It consists of adjusted net interest income
and adjusted non-interest income. A taxable equivalent is added to total
revenues so that the performance of the various assets can be compared
irrespective of their tax treatment, and specified items, if any, are excluded
so that total revenues can be better evaluated by excluding items that
management believes do not reflect the underlying financial performance of the
Bank's operations.
Adjusted Non-Interest Expenses
This item represents non-interest expenses excluding specified items, if any.
Specified items, if any, are excluded so that non-interest expenses can be
better evaluated by excluding items that management believes do not reflect
the underlying financial performance of the Bank's operations.
Adjusted Income Before Provisions for Credit Losses and Income Taxes
This item represents income before provisions for credit losses and income
taxes on a taxable equivalent basis and excluding specified items, if any. It
also represents the difference between adjusted total revenues and adjusted
non-interest expenses. A taxable equivalent is added to income before
provisions for credit losses and income taxes so that the performance of the
various assets can be compared irrespective of their tax treatment, and
specified items, if any, are excluded so that income before provisions for
credit losses and income taxes can be better evaluated by excluding items that
management believes do not reflect the underlying financial performance of the
Bank's operations.
Adjusted Income Taxes
This item represents income taxes on a taxable equivalent basis and excluding
income taxes on specified items, if any.
Adjusted Net Income
This item represents net income excluding specified items, if any. Specified
items, if any, are excluded so that net income can be better evaluated by
excluding items that management believes do not reflect the underlying
financial performance of the Bank's operations.
Adjusted Net income Attributable to Common Shareholders
This item represents net income attributable to common shareholders excluding
specified items, if any. Specified items, if any, are excluded so that net
income attributable to common shareholders can be better evaluated by
excluding items that management believes do not reflect the underlying
financial performance of the Bank's operations.
Adjusted Basic Earnings Per Share
This item represents basic earnings per share excluding specified items, if
any. Specified items, if any, are excluded so that basic earnings per share
can be better evaluated by excluding items that management believes do not
reflect the underlying financial performance of the Bank's operations.
Adjusted Diluted Earnings Per Share
This item represents diluted earnings per share excluding specified items, if
any. Specified items, if any, are excluded so that diluted earnings per share
can be better evaluated by excluding items that management believes do not
reflect the underlying financial performance of the Bank's operations.
The Bank also uses the below-described measures to assess its results, and a
quantitative reconciliation of these non-GAAP financial measures is presented
in Table 5 on page 124, and on page 7 of the document entitled Supplementary
Financial Information - Fourth Quarter 2024 available on the Bank's website at
nbc.ca.
Adjusted Non-Trading Net Interest Income
This item represents non-trading net interest income on a taxable equivalent
basis. It includes revenues related to financial assets and financial
liabilities associated with non-trading activities, net of interest expenses
and interest income related to the financing of these financial assets and
liabilities, and is used to calculate adjusted non-trading net interest
margin. A taxable equivalent is added to non-trading net interest income so
that the performance of the various assets can be compared irrespective of
their tax treatment.
Net Interest Income Related to Trading Activities on a Taxable Equivalent
Basis
This item represents net interest income related to trading activities plus a
taxable equivalent. It comprises dividends related to financial assets and
liabilities associated with trading activities, and certain interest income
related to the financing of these financial assets and liabilities, net of
interest expenses. A taxable equivalent is added to net interest income
related to trading activities so that the performance of the various assets
can be compared irrespective of their tax treatment.
Non-Interest Income Related to Trading Activities on a Taxable Equivalent
Basis
This item represents non-interest income related to trading activities plus a
taxable equivalent. It consists of realized and unrealized gains and losses as
well as interest income on securities measured at fair value through profit or
loss, income from held-for-trading derivative financial instruments, changes
in the fair value of loans at fair value through profit or loss, changes in
the fair value of financial instruments designated at fair value through
profit or loss, realized and unrealized gains and losses as well as interest
expense on obligations related to securities sold short, certain commission
income as well as other trading activity revenues, and any applicable
transaction costs. A taxable equivalent amount is added to the non-interest
income related to trading activities such that the returns of different assets
can be compared irrespective of their tax treatment.
Trading Activity Revenues on a Taxable Equivalent Basis
This item represents trading activity revenues plus a taxable equivalent.
These revenues comprise dividends related to financial assets and liabilities
associated with trading activities; certain interest income related to the
financing of these financial assets and liabilities, net of interest expenses;
realized and unrealized gains and losses as well as interest income on
securities measured at fair value through profit or loss; income from
held-for-trading derivative financial instruments; changes in the fair value
of loans at fair value through profit or loss; changes in the fair value of
financial instruments designated at fair value through profit or loss;
realized and unrealized gains and losses as well as interest expense on
obligations related to securities sold short; certain commission income as
well as other trading activity revenues, and any applicable transaction costs.
A taxable equivalent is added to trading activity revenues so that the
performance of the various assets can be compared irrespective of their tax
treatment.
Non-GAAP Ratios
The Bank uses non-GAAP ratios that do not have standardized meanings under
GAAP and that may therefore not be comparable to similar measures used by
other companies. A non-GAAP ratio is a ratio in which at least one component
is a non-GAAP financial measure. The Bank uses non-GAAP ratios to present
aspects of its financial performance or financial position.
The key non-GAAP ratios used by the Bank are described below.
Adjusted Return on Common Shareholders' Equity (ROE)
This item represents ROE excluding specified items, if any. It is adjusted net
income attributable to common shareholders expressed as a percentage of
average equity attributable to common shareholders. It is a general measure of
the Bank's efficiency in using equity. Specified items, if any, are excluded
so that ROE can be better evaluated by excluding items that management
believes do not reflect the underlying financial performance of the Bank's
operations.
Adjusted Dividend Payout Ratio
This item represents the dividend payout ratio excluding specified items, if
any. It is dividends on common shares (per share amount) expressed as a
percentage of adjusted basic earnings per share. This ratio is a measure of
the proportion of earnings that is paid out to shareholders in the form of
dividends. Specified items, if any, are excluded so that the dividend payout
ratio can be better evaluated by excluding items that management believes do
not reflect the underlying financial performance of the Bank's operations.
Adjusted Operating Leverage
This item represents operating leverage on a taxable equivalent basis and
excluding specified items, if any. It is the difference between the growth
rate of adjusted total revenues and the growth rate of adjusted non-interest
expenses, and it measures the sensitivity of the Bank's results to changes in
its revenues. Adjusted operating leverage is presented on a taxable equivalent
basis so that the performance of the various assets can be compared
irrespective of their tax treatment, and specified items, if any, are excluded
so that the operating leverage can be better evaluated by excluding items that
management believes do not reflect the underlying financial performance of the
Bank's operations.
Adjusted Efficiency Ratio
This item represents the efficiency ratio on a taxable equivalent basis and
excluding specified items, if any. The ratio represents adjusted non-interest
expenses expressed as a percentage of adjusted total revenues. It measures the
efficiency of the Bank's operations. The adjusted efficiency ratio is
presented on a taxable equivalent basis so that the performance of the various
assets can be compared irrespective of their tax treatment, and specified
items, if any, are excluded so that the efficiency ratio can be better
evaluated by excluding items that management believes do not reflect the
underlying financial performance of the Bank's operations.
Adjusted Net Interest Margin, Non-Trading
This item represents the non-trading net interest margin on a taxable
equivalent basis. It is calculated by dividing adjusted non-trading net
interest income by average non-trading interest-bearing assets. This ratio is
a measure of the profitability of non-trading activities. The adjusted
non-trading net interest margin includes adjusted non-trading net interest
income, which includes a taxable equivalent amount so that the performance of
the various assets can be compared irrespective of their tax treatment.
Supplementary Financial Measures
A supplementary financial measure is a financial measure that: (a) is not
reported in the Bank's Consolidated Financial Statements, and (b) is, or is
intended to be, reported periodically to represent historical or expected
financial performance, financial position, or cash flows. The composition of
these supplementary financial measures is presented in table footnotes or in
the Glossary section on pages 130 to 133 of this MD&A.
Capital Management Measures
The financial reporting framework used to prepare the financial statements
requires disclosure that helps readers assess the Bank's capital management
objectives, policies, and processes, as set out in IFRS Accounting Standards
in IAS 1 - Presentation of Financial Statements. The Bank has its own methods
for managing capital and liquidity, and IFRS Accounting Standards do not
prescribe any particular calculation method. These measures are calculated
using various guidelines and advisories issued by OSFI, which are based on the
standards, recommendations, and best practices of the Basel Committee on
Banking Supervision (BCBS), as presented in the following table.
OSFI guideline or advisory Measure
Capital Adequacy Requirements Common Equity Tier 1 (CET1) capital ratio
Tier 1 capital ratio
Total capital ratio
CET1 capital
Tier 1 capital
Tier 2 capital
Total capital
Risk-weighted assets
Maximum credit risk exposure under the Basel asset classes
Leverage Requirements Leverage ratio
Total exposure
Total Loss Absorbing Capacity (TLAC) Key indicators - TLAC requirements
Available TLAC
TLAC ratio
TLAC leverage ratio
Liquidity Adequacy Requirements Liquid asset portfolio
Encumbered assets and unencumbered assets
Liquidity coverage ratio (LCR)
High-quality liquid assets (HQLA)
Cash inflows/outflows and net cash outflows
Net stable funding ratio (NSFR)
Available stable funding items
Required stable funding items
Global Systemically Important Banks (G-SIBs) - G-SIB indicators
Public Disclosure Requirements
Reconciliation of Non-GAAP Financial Measures
Presentation of Results - Adjusted
Year ended October 31
(millions of Canadian dollars) 2024 2023((1))
Personal and Commercial Wealth Management Financial Markets USSF&I Other
Total Total
Operating results
Net interest income 3,587 833 (2,449) 1,303 (335) 2,939 3,586
Non-interest income 1,086 1,953 5,479 112 (169) 8,461 6,472
Total revenues 4,673 2,786 3,030 1,415 (504) 11,400 10,058
Non-interest expenses 2,486 1,633 1,246 439 250 6,054 5,753
Income before provisions for credit losses and income taxes 2,187 1,153 1,784 976 (754) 5,346 4,305
Provisions for credit losses 335 (1) 54 182 (1) 569 397
Income before income taxes (recovery) 1,852 1,154 1,730 794 (753) 4,777 3,908
Income taxes (recovery) 509 317 476 166 (507) 961 619
Net income 1,343 837 1,254 628 (246) 3,816 3,289
Items that have an impact on results
Net interest income
Taxable equivalent((2)) − − − − (79) (79) (332)
Amortization of the subscription receipt issuance costs((3)) − − − − (14) (14) −
Impact on net interest income − − − − (93) (93) (332)
Non-interest income
Taxable equivalent((2)) − − − − (306) (306) (247)
Gain on the fair value remeasurement of equity interests((4)(5)) − − − − 174 174 91
Management of the fair value changes related to the CWB acquisition((6)) − − − − (3) (3) −
Impact on non-interest income − − − − (135) (135) (156)
Non-interest expenses
CWB acquisition and integration charges((7)) − − − − 18 18 −
Impairment losses on intangible assets and premises and equipment((8)) − − − − − − 86
Litigation expenses((9)) − − − − − − 35
Expense related to changes to the Excise Tax Act((10)) − − − − − − 25
Provisions for contracts((11)) − − − − − − 15
Impact on non-interest expenses − − − − 18 18 161
Income taxes
Taxable equivalent((2)) − − − − (385) (385) (579)
Income taxes on the amortization of the subscription receipt issuance − − − − (4) (4) −
costs((3))
Income taxes on the gain on the fair value remeasurement − − − − 49 49 24
of equity interests((4)(5))
Income taxes on management of the fair value changes related to the − − − − (1) (1) −
CWB acquisition((6))
Income taxes on the CWB acquisition and integration charges((7)) − − − − (5) (5) −
Income taxes on the impairment losses on intangible assets and − − − − − − (24)
premises and equipment((8))
Income taxes on the litigation expenses((9)) − − − − − − (9)
Income taxes on the expense related to changes to the Excise Tax Act((10)) − − − − − − (7)
Income taxes on the provisions for contracts((11)) − − − − − − (4)
Income taxes related to the Canadian government's 2022 tax − − − − − − 24
measures((12))
Impact on income taxes − − − − (346) (346) (575)
Impact on net income − − − − 100 100 (74)
Operating results - Adjusted
Net interest income - Adjusted 3,587 833 (2,449) 1,303 (242) 3,032 3,918
Non-interest income - Adjusted 1,086 1,953 5,479 112 (34) 8,596 6,628
Total revenues - Adjusted 4,673 2,786 3,030 1,415 (276) 11,628 10,546
Non-interest expenses - Adjusted 2,486 1,633 1,246 439 232 6,036 5,592
Income before provisions for credit losses and income taxes - Adjusted 2,187 1,153 1,784 976 (508) 5,592 4,954
Provisions for credit losses 335 (1) 54 182 (1) 569 397
Income before income taxes (recovery) - Adjusted 1,852 1,154 1,730 794 (507) 5,023 4,557
Income taxes (recovery) - Adjusted 509 317 476 166 (161) 1,307 1,194
Net income - Adjusted 1,343 837 1,254 628 (346) 3,716 3,363
(1) Certain amounts have been adjusted to reflect accounting policy
changes arising from the adoption of IFRS 17. For additional information, see
Note 2 to the Consolidated Financial Statements.
(2) In light of the enacted legislation with respect to Canadian
dividends, the Bank did not recognize an income tax deduction or use the
taxable equivalent basis method to adjust revenues related to affected
dividends received after January 1, 2024 (for additional information, see the
Income Taxes section).
(3) During the year ended October 31, 2024, the Bank recorded an amount
of $14 million ($10 million net of income taxes) to reflect the amortization
of the issuance costs of the subscription receipts issued as part of the
agreement to acquire CWB (for additional information, see Notes 14 and 16 to
the Consolidated Financial Statements).
(4) During the year ended October 31, 2024, the Bank recorded a gain of
$174 million ($125 million net of income taxes) upon the remeasurement at fair
value of the interest already held in CWB.
(5) During the year ended October 31, 2023, the Bank had concluded that
it had lost significant influence over TMX Group Limited (TMX) and therefore
ceased using the equity method to account for this investment. The Bank had
designated its investment in TMX as a financial asset measured at fair value
through other comprehensive income in an amount of $191 million. Upon the
fair value measurement, a gain of $91 million ($67 million net of income
taxes) had been recorded in the Other heading of segment results.
(6) During the year ended October 31, 2024, the Bank recorded a
mark-to-market loss of $3 million ($2 million net of income taxes) on interest
rate swaps used to manage the fair value changes of CWB's assets and
liabilities that result in volatility of goodwill and capital on closing of
the transaction. For additional information, see the CWB Transaction section.
(7) During the year ended October 31, 2024, the Bank recorded
acquisition and integration charges of $18 million ($13 million net of income
taxes) related to the CWB transaction.
(8) During the year ended October 31, 2023, the Bank had recorded $75
million in intangible asset impairment losses ($54 million net of income
taxes) on technology development for which the Bank had decided to cease its
use or development (broken down into the business segments as follows:
Personal and Commercial ($59 million, $42 million net of income taxes), Wealth
Management ($8 million, $6 million net of income taxes), Financial Markets ($7
million, $5 million net of income taxes), and the Other heading of segment
results ($1 million)). There was also $11 million impairment losses recorded
in premises and equipment ($8 million net of income taxes) related to
right-of-use assets in the Other heading of segment results.
(9) During the year ended October 31, 2023, the Bank had recorded $35
million in litigation expenses ($26 million net of income taxes) in the Wealth
Management segment to resolve litigations and other disputes arising from
ongoing or potential claims against the Bank.
(10) During the year ended October 31, 2023, the Bank had recorded a $25
million expense ($18 million net of income taxes) in the Other heading of
segment results related to the retroactive impact of changes to the Excise Tax
Act, indicating that payment card clearing services rendered by a payment card
network operator are subject to the goods and services tax (GST) and the
harmonized sales tax (HST).
(11) During the year ended October 31, 2023, the Bank had recorded $15
million in charges ($11 million net of income taxes) for contract termination
penalties and for provisions for onerous contracts (broken down in the
business segments as follows: Personal and Commercial ($9 million, $7 million
net of income taxes) and the Other heading of segment results ($6 million,
$4 million net of income taxes)).
(12) During the year ended October 31, 2023, the Bank had recorded a $32
million tax expense with respect to the Canada Recovery Dividend, i.e., a
one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1
billion, as well as an $8 million tax recovery related to the 1.5% increase in
the statutory tax rate, which included the impact related to current and
deferred taxes for fiscal 2022. For additional information on these tax
measures, see the Income Taxes section.
Presentation of Basic and Diluted Earnings per Share - Adjusted
Year ended October 31
(Canadian dollars) 2024 2023((1))
Basic earnings per share $ 10.78 $ 9.33
Amortization of the subscription receipt issuance costs((2)) 0.03 −
Gain on the fair value remeasurement of equity interests((3)(4)) (0.36) (0.20)
Management of the fair value changes related to the CWB acquisition((5)) − −
CWB acquisition and integration charges((6)) 0.04 −
Impairment losses on intangible assets and premises and equipment((7)) − 0.19
Litigation expenses((8)) − 0.08
Expense related to changes to the Excise Tax Act((9)) − 0.05
Provisions for contracts((10)) − 0.03
Income taxes related to the Canadian government's 2022 tax measures((11)) − 0.07
Basic earnings per share - Adjusted $ 10.49 $ 9.55
Diluted earnings per share $ 10.68 $ 9.24
Amortization of the subscription receipt issuance costs((2)) 0.03 −
Gain on the fair value remeasurement of equity interests((3)(4)) (0.36) (0.20)
Management of the fair value changes related to the CWB acquisition((5)) − −
CWB acquisition and integration charges((6)) 0.04 −
Impairment losses on intangible assets and premises and equipment((7)) − 0.19
Litigation expenses((8)) − 0.08
Expense related to changes to the Excise Tax Act((9)) − 0.05
Provisions for contracts((10)) − 0.03
Income taxes related to the Canadian government's 2022 tax measures((11)) − 0.07
Diluted earnings per share - Adjusted $ 10.39 $ 9.46
(1) Certain amounts have been adjusted to reflect accounting policy
changes arising from the adoption of IFRS 17. For additional information, see
Note 2 to the Consolidated Financial Statements.
(2) During the year ended October 31, 2024, the Bank recorded an amount
of $14 million ($10 million net of income taxes) to reflect the amortization
of the issuance costs of the subscription receipts issued as part of the
agreement to acquire CWB (for additional information, see Notes 14 and 16 to
the Consolidated Financial Statements).
(3) During the year ended October 31, 2024, the Bank recorded a gain of
$174 million ($125 million net of income taxes) upon the remeasurement at fair
value of the interest already held in CWB.
(4) During the year ended October 31, 2023, the Bank had concluded that
it had lost significant influence over TMX Group Limited (TMX) and therefore
ceased using the equity method to account for this investment. The Bank had
designated its investment in TMX as a financial asset measured at fair value
through other comprehensive income in an amount of $191 million. Upon the
fair value measurement, a gain of $91 million ($67 million net of income
taxes) had been recorded.
(5) During the year ended October 31, 2024, the Bank recorded a
mark-to-market loss of $3 million ($2 million net of income taxes) on interest
rate swaps used to manage the fair value changes of CWB's assets and
liabilities that result in volatility of goodwill and capital on closing of
the transaction. For additional information, see the CWB Transaction section.
(6) During the year ended October 31, 2024, the Bank recorded
acquisition and integration charges of $18 million ($13 million net of income
taxes) related to the CWB transaction.
(7) During the year ended October 31, 2023, the Bank had recorded $75
million in intangible asset impairment losses ($54 million net of income
taxes) on technology development for which the Bank had decided to cease its
use or development, and it had recorded $11 million in premises and equipment
impairment losses ($8 million net of income taxes) related to right-of-use
assets.
(8) During the year ended October 31, 2023, the Bank had recorded $35
million in litigation expenses ($26 million net of income taxes) to resolve
litigations and other disputes arising from ongoing or potential claims
against the Bank.
(9) During the year ended October 31, 2023, the Bank had recorded a $25
million expense ($18 million net of income taxes) related to the retroactive
impact of changes to the Excise Tax Act, indicating that payment card clearing
services rendered by a payment card network operator are subject to the goods
and services tax (GST) and the harmonized sales tax (HST).
(10) During the year ended October 31, 2023, the Bank had recorded $15
million in charges ($11 million net of income taxes) for contract termination
penalties and for provisions for onerous contracts.
(11) During the year ended October 31, 2023, the Bank had recorded a $32
million tax expense with respect to the Canada Recovery Dividend, i.e., a
one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1
billion, as well as an $8 million tax recovery related to the 1.5% increase in
the statutory tax rate, which included the impact related to current and
deferred taxes for fiscal 2022. For additional information on these tax
measures, see the Income Taxes section.
Financial Disclosure
Disclosure Controls and Procedures
The Bank's financial information is prepared with the support of a set of
disclosure controls and procedures (DC&P) that are implemented by the
President and Chief Executive Officer (CEO) and by the Chief Financial Officer
and Executive Vice-President, Finance (CFO). During the year ended
October 31, 2024, in accordance with National Instrument 52-109 Certification
of Disclosure in Issuers' Annual and Interim Filings (National
Instrument 52-109) released by the CSA, the design and operation of these
controls and procedures were evaluated to determine their effectiveness.
As at October 31, 2024, the CEO and the CFO confirmed the effectiveness of
the DC&P. These controls are designed to provide reasonable assurance that
the information disclosed in annual and interim filings and in other reports
filed or submitted under securities legislation is recorded, processed,
summarized, and reported within the time periods specified by that
legislation. These controls and procedures are also designed to ensure that
such information is accumulated and communicated to the Bank's management,
including its signing officers, as appropriate, to allow for timely decisions
regarding disclosure.
This Annual Report was reviewed by the Bank's Disclosure Committee, Audit
Committee, and the Board of Directors (the Board), which approved it prior to
publication.
Internal Control Over Financial Reporting
The internal control over financial reporting (ICFR) is designed to provide
reasonable assurance that the financial information presented is reliable and
that the Consolidated Financial Statements were prepared in accordance with
GAAP, which are based on IFRS Accounting Standards, unless indicated otherwise
as explained on pages 14 to 20 of this MD&A. Due to inherent limitations
of internal controls, the ICFR may not prevent or detect all misstatements in
a timely manner.
The CEO and the CFO oversaw the evaluation work performed on the design and
operation of the Bank's ICFR in accordance with National Instrument 52‑109.
The ICFR was evaluated in accordance with the control framework of the
Committee of Sponsoring Organizations of the Treadway Commission (COSO - 2013)
for financial controls and in accordance with the control framework of the
Control Objectives for Information and Related Technologies (COBIT) for
information technology general controls.
Based on the evaluation results, the CEO and CFO concluded, as at October 31,
2024, that there are no material weaknesses, that the ICFR is effective and
provides reasonable assurance that the financial reporting is reliable, and
that the Bank's Consolidated Financial Statements were prepared in accordance
with GAAP.
Changes to Internal Control Over Financial Reporting
The CEO and CFO also undertook work that enabled them to conclude that, during
the year ended October 31, 2024, no changes were made to the ICFR that have
materially affected, or are reasonably likely to materially affect, the design
or operation of the ICFR.
Disclosure Committee
The Bank's Disclosure Committee assists the CEO and CFO by ensuring the
design, implementation, and operation of the DC&P and ICFR. In so doing,
the committee ensures that the Bank is meeting its disclosure obligations
under current regulations and that the CEO and CFO are producing the requisite
certifications.
Overview
Highlights
As at October 31 or for the year ended October 31
(millions of Canadian dollars, except per share amounts) 2024 2023((1)) % change
Operating results
Total revenues 11,400 10,058 13
Income before provisions for credit losses and income taxes 5,346 4,305 24
Net income 3,816 3,289 16
Net income attributable to the Bank's shareholders and holders of other equity 3,817 3,291 16
instruments
Return on common shareholders' equity((2)) 17.2 % 16.3 %
Dividend payout ratio((2)) 40.1 % 42.7 %
Operating leverage((2)) 8.1 % (5.8) %
Efficiency ratio((2)) 53.1 % 57.2 %
Earnings per share
Basic $ 10.78 $ 9.33 16
Diluted $ 10.68 $ 9.24 16
Operating results - Adjusted((3))
Total revenues - Adjusted((3)) 11,628 10,546 10
Income before provisions for credit losses and income taxes - Adjusted((3)) 5,592 4,954 13
Net income - Adjusted((3)) 3,716 3,363 10
Return on common shareholders' equity - Adjusted((4)) 16.7 % 16.6 %
Dividend payout ratio - Adjusted((4)) 41.2 % 41.7 %
Operating leverage - Adjusted((4)) 2.4 % (0.7) %
Efficiency ratio - Adjusted((4)) 51.9 % 53.0 %
Diluted earnings per share - Adjusted((3)) $ 10.39 $ 9.46 10
Common share information
Dividends declared $ 4.32 $ 3.98 9
Book value((2)) $ 65.74 $ 60.40
Share price
High $ 134.23 $ 103.58
Low $ 86.50 $ 84.97
Close $ 132.80 $ 86.22
Number of common shares (thousands) 340,744 338,285
Market capitalization 45,251 29,167
Balance sheet and off-balance-sheet
Total assets 462,226 423,477 9
Loans and acceptances, net of allowances 243,032 225,443 8
Deposits 333,545 288,173 16
Equity attributable to common shareholders 22,400 20,432 10
Assets under administration((2)) 766,082 652,631 17
Assets under management((2)) 155,900 120,858 29
Regulatory ratios under Basel III((5))
Capital ratios
Common Equity Tier 1 (CET1) 13.7 % 13.5 %
Tier 1 15.9 % 16.0 %
Total 17.0 % 16.8 %
Leverage ratio 4.4 % 4.4 %
TLAC ratio((5)) 31.2 % 29.2 %
TLAC leverage ratio((5)) 8.6 % 8.0 %
Liquidity coverage ratio (LCR)((5)) 150 % 155 %
Net stable funding ratio (NSFR)((5)) 122 % 118 %
Other information
Number of employees - Worldwide (full-time equivalent) 29,196 28,916 1
Number of branches in Canada 368 368 -
Number of banking machines in Canada 940 944 -
(1) Certain amounts have been adjusted to reflect accounting policy
changes arising from the adoption of IFRS 17. For additional information, see
Note 2 to the Consolidated Financial Statements.
(2) See the Glossary section on pages 130 to 133 for details on the
composition of these measures.
(3) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP financial measures.
(4) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP ratios.
(5) See the Financial Reporting Method section on pages 14 to 20 for
additional information on capital management measures.
About National Bank
The Bank carries out its activities in four business segments: Personal and
Commercial, Wealth Management, Financial Markets as well as U.S. Specialty
Finance and International (USSF&I), which comprises the activities of the
Credigy Ltd. (Credigy) and Advanced Bank of Asia Limited (ABA Bank)
subsidiaries. Other operating activities, certain specified items, Treasury
activities, and the operations of the Flinks Technology Inc. (Flinks)
subsidiary are grouped in the Other heading of segment results. Each
reportable segment is distinguished by services offered, type of clientele,
and marketing strategy. For additional information, see the Business Segment
Analysis section of this MD&A.
Objectives and 2024 Results
When setting its objectives, the Bank aims for a realistic challenge in the
prevailing business environment by considering such factors as changes in
banking industry financial results as well as the Bank's business development
plan. When the Bank sets its medium-term objectives, it does not take into
consideration specified items, if any, which are not reflective of the
underlying financial performance of the Bank's operations. Management
therefore excludes specified items when assessing the Bank's performance
against its objectives.
For fiscal 2024, the Bank recorded $3,816 million in net income compared to
$3,289 million in fiscal 2023, and its diluted earnings per share stood at
$10.68 compared to $9.24 in fiscal 2023. The Bank's return on common
shareholders' equity (ROE) was 17.2% in fiscal 2024 versus 16.3% in 2023. As
for its adjusted diluted earnings per share, it stood at $10.39 in fiscal
2024, up 10% from $9.46 in 2023. Furthermore, adjusted ROE was 16.7% in 2024
compared to 16.6% in 2023.
The following table compares the Bank's medium-term objectives with its fiscal
2024 results.
Medium-Term 2024 Results
Objectives
Growth in diluted earnings per share - Adjusted((1)) 5 - 10% 10%
ROE - Adjusted((2)) 15 - 20% 16.7%
Dividend payout ratio - Adjusted((2)) 40 - 50% 41.2%
Capital ratios((3)) Strong CET1 capital ratio((3)) 13.7%
Liquidity ratios((3)) Strong LCR((3)) 150%
The Bank's financial results met all of its medium-term objectives. Adjusted
diluted earnings per share for fiscal 2024 increased 10% year over year, which
is at the upper end of the target, due to strong performance by all the
business segments. For fiscal 2024, adjusted ROE was in the lower range of the
target. The adjusted dividend payout ratio fell within the target distribution
range, notably as a result of higher dividends paid during the fiscal year.
The CET1 capital ratio and the LCR, at 13.7% and 150%, respectively, also met
the objectives.
The Bank also examines its performance using the efficiency ratio and
operating leverage. For fiscal 2024, the efficiency ratio was 53.1% compared
to 57.2% in fiscal 2023, an improvement attributable to revenue growth in all
business segments and to the adverse effect of the specified items reported in
Non-interest expenses in 2023. As for the adjusted efficiency ratio, it stood
at 51.9% in fiscal 2024 compared to 53.0% in fiscal 2023, demonstrating
disciplined expense management by all the Bank's business segments. Also for
fiscal 2024, operating leverage and adjusted operating leverage were positive
at 8.1% and 2.4%, respectively, due to strong performance by all the business
segments.
Net Income Diluted Earnings Per Share Efficiency Ratio((4))
Year ended October 31 Year ended October 31 Year ended October 31
(millions of Canadian dollars) (Canadian dollars) (%)
2023 2024 2023 2024 2020 2021 2022 2023 2024
Reported as per IFRS Reported as per IFRS Reported as per IFRS
Adjusted((1)) Adjusted((1)) Adjusted((2))
(1) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP financial measures.
(2) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP ratios.
(3) See the Financial Reporting Method section on pages 14 to 20 for
additional information on capital management measures.
(4) See the Glossary section on pages 130 to 133 for details on the
composition of these measures.
Dividends
For fiscal 2024, the Bank declared $1,468 million in dividends to common
shareholders (2023: $1,344 million), representing 40.1% of net income
attributable to common shareholders (2023: 42.7%) and representing 41.2% of
adjusted net income attributable to common shareholders (2023: 41.7%).
Solid Capital Levels((1))
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 RWA and
by the impact of implementing OSFI's revised market risk framework. The Tier 1
capital ratio was more negatively affected by the RWA growth and is down
compared to October 31, 2023. The increase of the Total capital ratio is
explained by the $500 million issuance of medium-term notes during the fiscal
2024.
As at October 31, 2024, the leverage ratio was 4.4%, stable compared to
October 31, 2023, as growth in total exposure was offset by growth in Tier 1
capital.
High-Quality Loan Portfolio
Loans, net of allowances for credit losses, accounted for 53% of the Bank's
total assets and amounted to $243.0 billion as at October 31, 2024. For fiscal
2024, the Bank recorded $569 million in provisions for credit losses compared
to $397 million in fiscal 2023. The increase was mainly due to provisions for
credit losses on impaired loans excluding POCI loans((2)), which amounted to
$480 million in fiscal 2024, an increase of $235 million coming from Personal
Banking (including credit card receivables) in a context of normalization of
credit performance, from Commercial Banking as well as from the Financial
Markets segment and the USSF&I segment. For fiscal 2024, the provisions
for credit losses on impaired loans excluding POCI loans((2)) represented
0.20% of average loans and acceptances, compared to 0.11% in fiscal 2023.
Provisions for credit losses on non-impaired loans decreased by $84 million,
mainly due to the more favourable impact of updated macroeconomic scenarios in
2024 and greater credit risk deterioration in fiscal 2023. This decrease was
partly offset by the effects of the recalibration of certain risk parameters
and by growth in the loan portfolios. Furthermore, provisions for credit
losses on POCI loans increased by $21 million, due to favourable
remeasurements of certain Credigy portfolios in fiscal 2023, mitigated by
higher recoveries of credit losses in fiscal 2024 following repayments of
Commercial Banking POCI loans. Gross impaired loans totalled $2,043 million as
at October 31, 2024 compared to $1,584 million as at October 31, 2023 and
represented 0.84% of total loans.
Risk Profile
As at October 31 or for the year ended October 31
(millions of Canadian dollars) 2024 2023
Provisions for credit losses 569 397
Provisions for credit losses as a % of average loans and acceptances((2)) 0.24 % 0.18 %
Provisions for credit losses on impaired loans excluding POCI loans as a % of 0.20 % 0.11 %
average loans and acceptances((2))
Net write-offs excluding POCI loans as a % of average loans and 0.16 % 0.07 %
acceptances((2))
Gross impaired loans as a % of total loans and acceptances((2)) 0.84 % 0.70 %
Gross impaired loans 2,043 1,584
Net impaired loans 1,629 1,276
Annual Dividend Per Evolution of Regulatory Gross Impaired Loans
Common Share Ratios Under Basel III((1)) As at October 31
Year ended October 31 As at October 31 (millions of Canadian dollars)
(Canadian dollars)
2020 2021 2022 2023 2024 2023 2024 2020 2021 2022 2023 2024
CET1 Impaired loans - Stage 3
Tier 1 Impaired loans - POCI
Total Gross impaired loans as a % of total loans
Leverage ratio and acceptances (bps)((2))
Gross impaired loans excluding POCI as a % of total loans and acceptances
(bps)((2))
(1) See the Financial Reporting Method section on pages 14 to 20 for
additional information on capital management measures.
(2) See the Glossary section on pages 130 to 133 for details on the
composition of these measures.
Economic Review and Outlook
Global Economy
Inflation continues to decline globally, allowing central banks to consider
cutting interest rates. But despite the cuts announced to date, real rates
remain restrictive in many regions, limiting the potential for a rapid
economic recovery. This dynamic is particularly challenging in China, where
weak foreign demand, reflected in low producer prices, is putting pressure on
the economy. Added to this is a fragile domestic situation for the Chinese
economy despite the authorities' recovery efforts, particularly a struggling
real estate market, which contributes to disappointing growth prospects for
the country. In Europe, the International Monetary Fund (IMF) expects fiscal
consolidation by 2025 after years of government profligacy. While some are
skeptical about the chances of this happening, concerns about potential
disruptions in the bond market could push governments towards greater fiscal
discipline. Such discipline could weigh on European growth in the coming
quarters. These challenges are compounded globally by the uncertainty created
by the new U.S. administration, particularly the potential for tariffs. In our
scenario, this translates into a rather lackluster global growth in 2024
(3.2%)((1)) and 2025 (2.9%)((1)).
The U.S. economy continues to stand out, showing strength that continues to
confound skeptics. GDP grew 2.8% on an annualized basis in the third quarter.
This strong performance coincides with a government that has put pressure on
the spending accelerator, contradicting the IMF's April forecast of a
significant improvement in the U.S. government structural deficit in 2024. In
addition to governmental spending, consumer spending also remained strong,
growing at an annualized rate of 3.7%, the strongest in six quarters. But some
consumers seem to be running out of steam, as evidenced by the very low
savings rate and the growing number of people in default. We believe that
consumption will depend on developments in the labour market in the coming
months. On this front, the news is mixed. The unemployment rate has been
rising in recent months but remains low on a historical basis. Workers
perceive that it is increasingly difficult to find a job in a context where a
growing number of businesses are saying that their sales level is their main
issue. On the face of it, the Republican sweep in the presidential elections
suggests that they have a free hand to implement the new president-elect's
promises. However, investors remain vigilant about the potential fiscal
largesse of the next president, and this has been reflected in interest rates,
which have been rising again, leading to deteriorating financing conditions.
Many question the ability of the U.S. Federal Reserve to lower interest rates,
especially since progress on inflation could be hampered by tariffs and action
against illegal workers. Overall, while the government may continue to support
growth, high interest rates will remain a headwind for the economy. Moreover,
trade tensions could lead to deteriorating financial conditions. We therefore
expect the economy to slow from 2.8%((1)) in 2024 to 1.9%((1)) in 2025.
Canadian Economy
In Canada, inflation has remained within the central bank's target range (1%
to 3%) since the beginning of the year, falling even below 2% in September.
This demonstrates the effectiveness of the central bank's restrictive interest
rate policy. However, this containment of inflation had a cost on growth, as
preliminary data in the third quarter showed that the economy continues to
grow below its potential, a trend observed since 2022. At the same time, the
labour market is showing no signs of stabilization, as evidenced by the
continued decline in the employment rate, including that of the 25-54 age
group. We do not expect a recovery in the near term. Indeed, job offers in the
private sector are declining rapidly, and hiring intentions remain largely
insufficient in the face of remarkable population growth. Business creation
also remains weak, reflecting a business environment degraded by an overly
restrictive monetary policy. As a result, the Bank of Canada should celebrate
its victory over inflation and continue to lower its policy rate at a steady
pace in order to bring its monetary policy to neutral as soon as possible,
which should lead to slightly stronger growth in the second half of the year.
The federal government's announced cap on immigration could reduce economic
growth slightly in 2025, but on the other hand limit the increase in the
unemployment rate as many newcomers are currently on the sidelines in an
unfavourable hiring climate. In the meantime, we expect economic growth of
only 1.0%((1)) in 2024 and 1.3%((1)) in 2025, which would translate into an
unemployment rate close to 7%((1)) in 2025.
Quebec Economy
GDP growth in Quebec was encouraging in July, with a 0.3% increase. However,
this rebound followed a stagnation in the previous two months. Growth for 2024
overall is still expected to be sluggish given the restrictive monetary
policy. However, Quebec seems to be doing well on a relative basis. In
October, the province's unemployment rate was the lowest in Canada. GDP per
capita is also more resilient in the province than in the country as a whole
in the current cycle, i.e. since 2019. This outperformance is driven by
strong economic fundamentals. First, the province's economy is one of the most
diversified jurisdictions in North America, making it less vulnerable to
economic cycle fluctuations and potentially escalating trade tensions. In
addition, the level of household debt in Quebec is lower than the Canadian
average and the province has the largest proportion of dual-income households
in the country. Moreover, the resale market was reinvigorated during the year
in the wake of interest rate cuts, in contrast to the trend, and probably
helped by housing affordability, which is less problematic than elsewhere. The
much higher savings rate than the national average provides a cushion that can
ease the shock to consumption should the economic backdrop further
deteriorate. We expect slow growth in 2024 and 2025 (1.2%((1)) and 1.0%((1))
respectively). Considering that the province's population growth is lower than
the Canadian average, this would be sufficient to allow Quebec to maintain an
unemployment rate that is comfortably below the national average for these two
years, namely 5.3%((1)) in 2024 and 6.1%((1)) in 2025 (versus 6.3%((1)) and
7.1%((1)), respectively, for Canada).
(1) Real GDP growth forecasts, National Bank Financial's Economics and
Strategy group
Financial
Analysis
Consolidated Results
Year ended October 31
(millions of Canadian dollars) 2024 2023((1)) % change
Operating results
Net interest income 2,939 3,586 (18)
Non-interest income 8,461 6,472 31
Total revenues 11,400 10,058 13
Non-interest expenses 6,054 5,753 5
Income before provisions for credit losses and income taxes 5,346 4,305 24
Provisions for credit losses 569 397 43
Income before income taxes 4,777 3,908 22
Income taxes 961 619 55
Net income 3,816 3,289 16
Diluted earnings per share (dollars) 10.68 9.24 16
Taxable equivalent basis((2))
Net interest income 79 332
Non-interest income 306 247
Income taxes 385 579
Impact of taxable equivalent basis on net income − −
Specified items((2))
Amortization of the subscription receipt issuance costs (14) −
Gain on the fair value remeasurement of equity interests 174 91
Management of the fair value changes related to the CWB acquisition (3) −
CWB acquisition and integration charges (18) −
Impairment losses on intangible assets and premises and equipment − (86)
Litigation expenses − (35)
Expense related to changes to the Excise Tax Act − (25)
Provisions for contracts − (15)
Specified items before income taxes 139 (70)
Income taxes related to the Canadian government's 2022 tax measures − 24
Income taxes on specified items 39 (20)
Specified items after income taxes 100 (74)
Operating results - Adjusted((2))
Net interest income - Adjusted 3,032 3,918 (23)
Non-interest income - Adjusted 8,596 6,628 30
Total revenues - Adjusted 11,628 10,546 10
Non-interest expenses - Adjusted 6,036 5,592 8
Income before provisions for credit losses and income taxes - Adjusted 5,592 4,954 13
Provisions for credit losses 569 397 43
Income before income taxes - Adjusted 5,023 4,557 10
Income taxes - Adjusted 1,307 1,194 9
Net income - Adjusted 3,716 3,363 10
Diluted earnings per share - Adjusted (dollars) 10.39 9.46 10
Average assets((3)) 457,262 430,646 6
Average loans and acceptances((3)) 234,180 215,976 8
Average deposits((3)) 315,605 284,570 11
Operating leverage((4)) 8.1 % (5.8) %
Operating leverage - Adjusted((5)) 2.4 % (0.7) %
Efficiency ratio((4)) 53.1 % 57.2 %
Efficiency ratio - Adjusted((5)) 51.9 % 53.0 %
(1) Certain amounts have been adjusted to reflect accounting policy
changes arising from the adoption of IFRS 17. For additional information, see
Note 2 to these Consolidated Financial Statements.
(2) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP financial measures.
(3) Represents an average of the daily balances for the period.
(4) See the Glossary section on pages 130 to 133 for details on the
composition of these measures.
(5) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP ratios.
Analysis of Consolidated Results
Financial Results
The Bank's net income for fiscal 2024 was $3,816 million, up 16% from
$3,289 million in fiscal 2023. This increase is explained by revenue growth
in all business segments, mitigated by higher non-interest expenses,
provisions for credit losses and income taxes. Income before provisions for
credit losses and income taxes was up 24% compared to fiscal 2023.
Adjusted net income for the year ended October 31, 2024 was $3,716 million,
up 10% from $3,363 million in fiscal 2023, mainly attributable to the good
performance of all business segments. Specified items ((1)) had a favourable
impact of $100 million on net income in fiscal 2024, while they had an
unfavourable impact of $74 million on net income in fiscal 2023. Adjusted
income before provisions for credit losses and income taxes rose 13% compared
to fiscal 2023.
Total Revenues
Total revenues 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. For
additional information on total revenues, see Table 2 on page 122. Adjusted
total revenues in 2024 were $11,628 million, up $1,082 million or 10% from
$10,546 million for the prior year.
Net Interest Income
For fiscal 2024, net interest income was $2,939 million, down 18% from
$3,586 million (Table 3, page 122). Net interest income in fiscal 2024
included $14 million representing the amortization of the issuance costs for
the subscription receipts issued in connection with the agreement to acquire
CWB. Adjusted net interest income totalled $3,032 million in fiscal 2024,
down 23% from $3,918 million in fiscal 2023, partly due to the
discontinuation of the use of the taxable equivalent method to adjust Canadian
dividend income received after January 1, 2024 (for additional information,
see the Income Tax section).
In the Personal and Commercial segment, net interest income increased
$266 million or 8% to $3,587 million in fiscal 2024. The increase was
primarily driven by the growth in personal and commercial loans and deposits
of 6% and 5%, respectively, compared to fiscal 2023. The growth in loans came
mainly from mortgage lending and business and government lending. In addition,
the transition from bankers' acceptances to loans referencing the Canadian
Overnight Repo Rate Average (CORRA) contributed to the increase in net
interest income in the Personal and Commercial segment. In the Wealth
Management segment, net interest income grew 7% to $833 million, as a result
of higher loan and deposit volumes.
In the Financial Markets segment, net interest income on a taxable equivalent
basis was down considerably from fiscal 2023, mainly due to trading activities
and should be examined together with the other items of trading activity
revenues. In the USSF&I segment, net interest income rose by $171 million
or 15%, as a result of the business growth at the ABA Bank subsidiary, in
particular the sustained increase in assets, the increase in net interest
income of the Credigy subsidiary stemming from higher loan volumes as well as
dividend income recorded in fiscal 2024 related to an investment in a
financial group.
Non-Interest Income
For fiscal 2024, non-interest income was $8,461 million, up 31% from $6,472
million for the prior year. For additional information on non-interest income,
see Table 4 on page 123. Adjusted non-interest income was $8,596 million in
fiscal 2024, up 30% from fiscal 2023.
Underwriting and advisory fees were up 11% compared to 2023, notably due to
greater capital markets activity partly offset by lower merger and acquisition
revenues in the Financial Markets segment. Securities brokerage commissions
were up 11%, primarily due to increased client activity in the Wealth
Management segment. Mutual fund revenues and investment management and trust
services fees totalled $1,779 million, up $196 million, as a result of the
growth in assets under administration and assets under management caused by
the rise in stock markets during fiscal 2024 as well as positive net inflows
for the various solutions.
Credit fee revenues were up $12 million, while revenues from acceptances and
letters of credit and guarantee were down by $126 million compared to fiscal
2023. This decrease is explained by the revenues from bankers' acceptances in
Commercial Banking and in the Wealth Management and Financial Markets segments
in connection with the transition of bankers' acceptances to CORRA loans. Card
revenues grew 5% in fiscal 2024 due to a sharp increase in purchasing volumes.
In addition, revenues from deposit and payment service charges decreased by
2%.
(1) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP financial measures.
Non-interest income related to trading activity on a taxable equivalent basis
totalled $4,633 million, up from $2,943 million in 2023 (Table 5, page 124).
Including the portion recognized in net interest income, trading activity
revenues on a taxable equivalent basis amounted to $1,627 million in 2024, an
increase of $179 million compared to fiscal 2023. This increase was mainly
attributable to equities revenues and interest rate and credit revenues in the
Financial Markets segment. In addition, trading activity revenues on a taxable
equivalent basis from the other segments decreased year over year.
Net gains on non-trading securities were up $248 million compared to fiscal
2023, mainly as a result of Treasury activities and a gain of $174 million
recorded on the fair value remeasurement of the Bank's interest in CWB. In
addition, insurance revenues and foreign exchange revenues grew by
$14 million and $42 million, respectively, compared to fiscal 2023. The
share of net income of associates and joint ventures decreased by $3 million
compared to the prior year. Lastly, other revenues amounted to $180 million
in fiscal 2024, down $81 million compared to 2023. This decrease was primarily
due to a gain of $91 million in fiscal 2023 on the fair value remeasurement
of the Bank's interest in TMX, partly offset by the higher favourable impact
of the fair value remeasurement of certain Credigy portfolios in fiscal 2024.
Non-Interest Expenses
Non-interest expenses totalled $6,054 million in fiscal 2024, up
$301 million or 5% from the prior year (Table 6, page 124). Non-interest
expenses in fiscal 2024 included charges of $18 million related to the
acquisition and integration of CWB, while the following specified items had
been recorded in fiscal 2023: impairment losses on premises and equipment and
intangible assets of $86 million, litigation expenses of $35 million, a $25
million expense related to changes to the Excise Tax Act and provisions for
contracts of $15 million. Adjusted non-interest expenses stood at
$6,036 million in fiscal 2024, up $444 million or 8% from $5,592 million in
fiscal 2023.
For fiscal 2024, compensation and employee benefits totalled $3,725 million,
an increase of 9% compared to the prior year, mainly due to salary growth as
well as variable compensation related to revenue growth. Occupancy expenses,
including depreciation expense on premises and equipment, increased, partly
due to expenses related to the Bank's new head office building and the
expansion of the banking network at the ABA Bank subsidiary. The decrease in
technology expenses, including depreciation expense, was attributable to
impairment losses on intangible assets recorded in 2023, despite significant
investments made to support the Bank's technological evolution and business
development plan made during fiscal 2024. Communications expenses remained
relatively stable compared to prior year, while professional fees rose, mainly
due to the Bank's technological evolution, the increase in external management
fees in the Wealth Management segment, and charges of $18 million related to
the acquisition and integration of CWB recorded in fiscal 2024. In addition,
advertising and business development expenses were up and the decrease in
other expenses compared to fiscal 2023 is partly explained by litigation
expenses, an expense related to changes to the Excise Tax Act and provisions
for contracts recorded in fiscal 2023.
Provisions for Credit Losses
For fiscal 2024, provisions for credit losses totalled $569 million compared
to $397 million in fiscal 2023 (Table 7, page 125). The increase was mainly
due to provisions for credit losses on impaired loans excluding POCI loans
((1)) of $480 million in fiscal 2024, up $235 million. This increase comes
from Personal Banking (including credit card receivables), in an environment
characterized by a normalization of credit performance, and Commercial
Banking, for $77 million and $58 million, respectively, Financial Markets
for $31 million and USSF&I for $68 million. Provisions for credit losses
on non-impaired loans decreased by $84 million, mainly due to the more
favourable impact of the updated macroeconomic scenarios in 2024 and a more
significant deterioration in credit risk in fiscal 2023. These declines were
offset by the effects of the recalibration of certain risk parameters and the
growth in loan portfolios. In addition, provisions for credit losses on POCI
loans increased by $21 million, due to the favourable remeasurement of certain
Credigy portfolios in fiscal 2023, partly offset by higher credit loss
recoveries in fiscal 2024 following repayments of POCI loans in Commercial
Banking. For fiscal 2024, provisions for credit losses on impaired loans
excluding POCI loans((1)) represented 0.20% of average loans and acceptances,
compared to 0.11% in the prior year.
Income Taxes
Detailed information about the Bank's income taxes is provided in Note 26 to
the Consolidated Financial Statements. For fiscal 2024, income taxes stood at
$961 million, representing an effective income tax rate of 20%, compared to
income taxes of $619 million and an effective income tax rate of 16% in
fiscal 2023. The change in effective income tax rate stems mainly from a lower
level and proportion of tax-exempt income in fiscal 2024 reflecting the denial
of the deduction in respect of dividends covered by Bill C-59 since January 1,
2024, partly offset by the impact of the Canadian government's 2022 tax
measures recorded in the first quarter of 2023, namely the Canada Recovery
Dividend and the additional 1.5% tax on banks and life insurers.
(1) See the Glossary section on pages 130 to 133 for details on the
composition of these measures.
Business Segment Analysis
The Bank carries out its activities in four business segments, which are
defined below. For presentation purposes, other activities are grouped in the
Other heading of segment results. Each reportable segment is distinguished by
services offered, type of clientele, and marketing strategy.
National Bank of Canada
Business Personal and Wealth Financial U.S. Specialty
Segments Commercial Management Markets Finance and
International
Core › Banking services › Full-service brokerage › Equities, interest rate and credit products, commodities and foreign › U.S. Specialty Finance
Activities
exchange
› Credit services › Private banking
- Credigy
› Corporate banking
› Financing › Direct brokerage
› International
› Investment banking
› Investment solutions › Investment solutions and transactional products
- ABA Bank (Cambodia)
› Insurance › Administrative and trade execution services - Minority interests in emerging markets
› Trust and estate services
Other: Treasury activities, liquidity management, Bank funding,
asset/liability management, Flinks Technology Inc. subsidiary activities (a
fintech specialized in financial data aggregation and distribution), and
corporate units.
Total Revenues by Income Before Provisions for Net Income by Business Segment((1))
Business Segment((1)) Credit Losses and Income Taxes by Business Segment((1)) Year ended October 31, 2024
Year ended October 31, 2024 Year ended October 31, 2024
Personal and Commercial (2023: 41%) Personal and Commercial (2023: 37%) Personal and Commercial (2023: 35%)
Wealth Management (2023: 23%) Wealth Management (2023: 19%) Wealth Management (2023: 20%)
Financial Markets (2023: 25%) Financial Markets (2023: 29%) Financial Markets (2023: 30%)
USSF&I (2023: 11%) USSF&I (2023: 15%) USSF&I (2023: 15%)
(1) Excluding the Other heading.
Personal and Commercial
The Personal and Commercial segment meets the financial needs of close to 2.8
million individuals and over 148,000 businesses across Canada. These clients
entrust the Bank to manage, invest, and safeguard their assets and to finance
their projects. Clients turn to the Bank's experienced advisors who take the
time to understand their specific needs and help them reach their financial
goals. Thanks to the Bank's convenient self-banking channels, 368 branches,
and 940 banking machines across Canada, clients can do their daily banking
whenever and wherever they wish.
Total Revenues by Category Total Revenues by Geographic Distribution
Year ended October 31, 2024 Year ended October 31, 2024
Retail (2023: 42%) Province of Quebec (2023: 77%)
Payment Solutions (2023: 11%) Other provinces (2023: 23%)
Insurance (2023: 2%)
Commercial Banking (2023: 45%)
Personal Banking
Personal Banking provides a complete range of financing and investment
products and services to help clients reach their financial goals throughout
every stage in their lives. It offers everyday transaction solutions, mortgage
loans and home equity lines of credit, consumer loans, payment solutions,
savings and investment solutions as well as a range of insurance products.
Commercial Banking
Commercial Banking serves the financial needs of small- and medium-sized
enterprises (SMEs) and large corporations, helping them to achieve growth. It
offers a full line of financial products and services, including credit,
deposit, and investment solutions as well as international trade, foreign
exchange transaction, payroll, cash management, insurance, electronic
transaction, and complementary services. With deep roots in the entrepreneur
community for over 160 years, Commercial Banking has the leading franchise in
core Quebec market.
Economic and Market Review
In Canada, inflation has stayed within the central bank's target range (1% to
3%) since the start of the year and even fell below 2% in September. This
underscores the effectiveness of the restrictive interest rate applied by the
central bank. However, this control over inflation has taken its toll on
growth, with the economy continuing to grow at a pace that falls short of its
potential, a trend that began in 2022. At the same time, the labour market
deteriorated over this period, and any signs of stabilization are yet to
appear, as corporate hiring intentions remain below their historical average.
Business investment continues to be held back by high interest rates, much
like business creation. As a result, the Bank of Canada is expected to take
advantage of the progress made on inflation and continue steadily lowering its
key interest rate in order to neutralize monetary policy as soon as possible.
The start of the monetary easing cycle seemed to have had minimal impact on
the housing market in recent months, due in part to lingering affordability
challenges, but the data on existing home sales in October reveal a notable
upturn in activity that could continue through to 2025, provided that the
deterioration in the labour market remains limited. Following years of record
population growth, the federal government's new immigration policy may reduce
economic growth slightly in 2025 but also limit any increase in the
unemployment rate, as many new arrivals currently find themselves on the
sidelines in an unfavourable hiring climate. Companies are faced with a
glaring productivity problem and can no longer rely on immigration to support
their growth, so they will need to innovate more and make significant
investments in operations. Fortunately, they can count on an improved interest
rate environment.
The economic environment in 2024 and the outlook for 2025 are discussed in
more detail in the Economic Review and Outlook section on page 24.
Objectives and Strategic Priorities
The Personal and Commercial segment is targeting growth by becoming a more
simple, efficient bank focused on constantly improving the client experience.
2024 Achievements and Highlights 2025 Priorities
Accelerate net client acquisition
› Grew in terms of total client acquisition: › Enhance our differentiation and brand awareness to accentuate our
impact in and outside Quebec.
· Enhanced our targeted coverage in growth markets and high-growth
segments, including outside Quebec; › Optimize our physical distribution network across the Bank to
maximize our impact/visibility/awareness within our markets and amplify
· Improved the enrolment experience for our newcomer clients, synergies.
including a new guaranteed investment certificate (GIC) product;
› Continue recruiting talented employees in targeted markets outside
· Deployed distinctive banking offers to our diverse clienteles of Quebec to drive our strategies and encourage client acquisition.
professional women and women entrepreneurs;
› Train our consulting workforce and support our clients in the
· Increased familiarity with and consideration for the brand; transition to energy efficiency through green financing and responsible
investing.
· Continuously improved our digital enrolment journeys.
› Accelerate the transformation of our credit card ecosystem.
› Improved accessibility by developing our technological
capabilities:
· New appointment-booking experience free of any geographical
constraints;
· Enhanced remote authentication.
› Expanded our sales and sales support teams in Western Canada for
our key Commercial Banking sectors.
› Achieved greater synergies and business opportunities for our
joint PB1859 and Commercial Banking clients.
› Accelerated our green loan certifications to the Real Estate
portfolio.
Improve client engagement
› Strengthened our advisory services by focusing on › Strengthen development of our advisory force to continue
professionalizing our training plans and the continuing professional proactively supporting our investing clients.
development of our advisors.
› Accelerate growth in commercial deposits through our cash
› Finalized the deployment of our New Experience across all our management consultants.
branches, supporting our experts and promoting digital engagement for our
clients. › Continue to roll out a new learning platform and experience to
drive development and internal mobility of our employees.
› Migrated most of our Commercial Banking clients to the new digital
experience with modernized features. › Enhance the client and advisory experience on our digital channels
and digitize new features.
› Continued to modernize our cash management solutions for our Large
Corporations. › Enhance the client experience in mortgage renewals.
› Increased the number of clients reached on our mobile platforms by › Continue migrating business clients toward digital banking and
developing personalized advice banners and relevant offers. continue to add self-service features to our transactional sites.
› Added several real-time transactional features to online banking, › Continue our efforts to stimulate financial inclusion,
mainly for our investment and banking solutions. particularly among vulnerable client groups.
› Provided ongoing support to clients in fraud prevention and
cybersecurity through our advice and content.
2024 Achievements and Highlights 2025 Priorities
Leverage our simplification, and enhance operational efficiency
› Simplified and modernized our banking offers and services. › Implement a major upgrade of the technological environment of all
our Client Contact Centres.
› Continued to simplify and automate our financing processes to
reduce lead times for clients. › Modernize our business capabilities by enhancing our technological
ecosystems, in particular in business financing, cash management, fraud
› Improved accessibility at our Client Contact Centres by deploying management, and payment systems.
modernized capabilities.
› Focus on leveraging hyperautomation to improve our tools and
› Developed our Commercial Banking distribution model outside Quebec processes in order to grow and generate efficiencies.
in order to tailor service delivery to the potential market and to client
needs. › Simplify how we carry out transactions and transform our assisted
service offering.
Segment Results - Personal and Commercial
Year ended October 31
(millions of Canadian dollars) 2024 2023((1)) % change
Net interest income 3,587 3,321 8
Non-interest income 1,086 1,083 −
Total revenues 4,673 4,404 6
Non-interest expenses 2,486 2,462 1
Income before provisions for credit losses and income taxes 2,187 1,942 13
Provisions for credit losses 335 238 41
Income before income taxes 1,852 1,704 9
Income taxes 509 468 9
Net income 1,343 1,236 9
Less: Specified items after income taxes((2)) − (49)
Net income - Adjusted((2)) 1,343 1,285 5
Net interest margin((3)) 2.33 % 2.35 %
Average interest-bearing assets((3)) 153,980 141,458 9
Average assets((4)) 158,917 148,511 7
Average loans and acceptances((4)) 157,286 147,716 6
Net impaired loans((3)) 505 285 77
Net impaired loans as a % of total loans and acceptances((3)) 0.3 % 0.2 %
Average deposits((4)) 90,382 85,955 5
Efficiency ratio((3)) 53.2 % 55.9 %
Efficiency ratio - Adjusted((5)) 53.2 % 54.4 %
(1) For the year ended October 31, 2023, certain amounts have been
adjusted to reflect accounting policy changes arising from the adoption of
IFRS 17. For additional information, see Note 2 to the Consolidated Financial
Statements.
(2) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP financial measures. During fiscal 2023, the
segment had recorded, in the Non-interest expenses item, $59 million in
intangible asset impairment losses ($42 million net of income taxes) on
technology development as well as charges of $9 million ($7 million net of
income taxes) for contract termination penalties.
(3) See the Glossary section on pages 130 to 133 for details on the
composition of these measures.
(4) Represents an average of the daily balances for the period.
(5) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP ratios.
Financial Results
In the Personal and Commercial segment, net income totalled $1,343 million in
fiscal 2024, a 9% increase from $1,236 million in fiscal 2023 that was
attributable to the $269 million or 6% growth in total revenues, partly offset
by higher provisions for credit losses. Furthermore, adjusted net income was
up 5% compared to $1,285 million in fiscal 2023, which excluded the specified
items recorded in fiscal 2023. Income before provisions for credit losses and
income taxes amounted to $2,187 million in fiscal 2024, up 13% from fiscal
2023. The increase in total revenues was essentially attributable 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.
For fiscal 2024, the Personal and Commercial segment's non-interest expenses
stood at $2,486 million, a 1% increase compared to the prior year that was
mainly due to higher compensation and employee benefits resulting from salary
increases and greater investments made as part of the segment's technological
evolution. These increases were offset by specified items totalling $68
million recorded in fiscal 2023. The efficiency ratio of 53.2% improved by 2.7
percentage points compared to October 31, 2023. Excluding the 2023 specified
items, the segment's adjusted non-interest expenses were up 4% compared to
$2,394 million in 2023, and the adjusted efficiency ratio improved by 1.2
percentage points compared to 54.4% in 2023.
The Personal and Commercial segment recorded provisions for credit losses of
$335 million in 2024, which is $97 million more than the $238 million recorded
in 2023. This increase was due to higher provisions for credit losses on
impaired loans in Personal Banking (including credit card receivables),
reflecting a normalization of credit performance, as well as on impaired loans
in Commercial Banking. In addition, provisions for credit losses on
non-impaired loans were down compared to fiscal 2023 and higher credit loss
recoveries were recorded in fiscal 2024 as a result of repayments of POCI
loans in Commercial Banking.
Personal Banking
Personal Banking's total revenues amounted to $2,587 million in 2024, a 7%
increase from $2,427 million in 2023. The rise in net interest income was
driven by a 3% growth in loan volumes, a 4% growth in deposit volumes, as well
as higher deposit and loan margins. The $69 million increase in non-interest
income was primarily attributable to insurance revenues, higher credit card
revenues due to a sharp increase in purchasing volumes and internal commission
revenues related to the distribution of Wealth Management products.
Non-interest expenses decreased by $12 million in 2024. Higher compensation
and employee benefits resulting from salary increases and greater investments
made as part of the segment's technological evolution of the segment were
partly offset by specified items recorded in fiscal 2023.
Commercial Banking
Commercial Banking's total revenues amounted to $2,086 million in 2024, rising
6% from $1,977 million in 2023. The increase in net interest income was
essentially driven by 13% growth in loans and 7% growth in deposits, as well
as the transition from bankers' acceptances to CORRA loans, partly offset by a
lower loan margin. Non-interest income was down $66 million compared to fiscal
2023, mainly due to lower bankers' acceptance revenues resulting from the
transition from bankers' acceptances to CORRA loans. Non-interest expenses
were up $36 million, mainly as a result to higher compensation and employee
benefits due to salary increases as well as investments made as part of the
segment's technological evolution, partly offset by the impact of the
specified items recorded in fiscal 2023.
Average Loans and Acceptances Average Deposits
Year ended October 31 Year ended October 31
(millions of Canadian dollars) (millions of Canadian Dollars)
2023 2024 2023 2024
Total - Personal Banking and Commercial Banking Total - Personal Banking and Commercial Banking
Personal Banking Personal Banking
Commercial Banking Commercial Banking
Wealth Management
As a leader in Quebec and firmly established across Canada, the Wealth
Management segment serves all market segments by emphasizing advisory-based
service and close client relationships. It delivers a full range of wealth
management products and solutions through an omnichannel distribution network
and a differentiated business model. Wealth Management also provides services
to independent advisors and institutional clients.
Total Revenues by Category Total Revenues by Geographic Distribution
Year ended October 31, 2024 Year ended October 31, 2024
Net interest income (2023: 31%) Province of Quebec (2023: 63%)
Fee-based services (2023: 57%) Other provinces (2023: 37%)
Transaction-based and other revenues (2023: 12%)
Full-Service Brokerage
With the largest network of wealth management advisors in Quebec and 100
points of service across Canada, National Bank Financial Wealth Management
(NBFWM) is serving nearly 240,000 clients. The team of advisors provides
portfolio management services, financial and succession planning services and
insurance services, while mobilizing a wide range of expertise available
within the Bank to meet the specific needs of clients.
Private Banking
Private Banking 1859 (PB1859) offers highly personalized wealth management
services and advice across Canada, helping affluent clients benefit from
comprehensive management of their personal and family fortunes. A true
industry leader across Canada with a broad offering of financial solutions and
strategies that include wealth protection, growth and transition.
Direct Brokerage
National Bank Direct Brokerage (NBDB) offers a multitude of financial products
and investment tools to self-directed investing across Canada through its
digital platform. NBDB allows clients who wish to take over the management of
their investments online or through telephone agents to support self-directed
investors on more complex transactions.
Investment Solutions and Transactional Products
National Bank Investments Inc. (NBI) manufactures and offers investment funds,
exchange-traded funds (ETFs), investment solutions, and services to consumers
and institutional investors through the Bank's internal and external networks.
NBI is Canada's largest investment fund manager to entrust the management of
its investments exclusively to external portfolio managers. Wealth Management
also offers a wide range of investment products in collaboration with various
internal sectors such as guaranteed investment certificates (GICs), mutual
funds, notes, structured products and monetization vehicles.
Administrative and Trade Execution Services
National Bank Independent Network (NBIN) is a Canadian leader in providing
administrative services such as trade execution, custodial services, and
brokerage solutions to many independent financial services firms across
Canada, in particular to introducing brokers, portfolio managers, and
investment fund managers.
Trust and Estate Services
Through National Bank Trust Inc. (NBT), Wealth Management provides retail and
institutional clients with turnkey services and solutions. Its team of experts
offers a full range of high value-added services designed to consolidate,
protect, and transfer its customers' wealth and give them peace of mind. NBT
also provides integrated trustee and depository services as well as securities
custody services.
Economic and Market Review
South of the border, the U.S. economy continues to surprise on account of its
strength, supported by substantial fiscal spending and by household
consumption that has remained robust to date. Progress has been made on
inflation over the past year, but this normalization has stalled in recent
months, suggesting a slower pace of monetary easing than initially
anticipated. It is therefore still too early to celebrate a soft landing of
the U.S. economy. Even so, the S&P 500 reached record levels following
Donald Trump's election to the White House, which also took the S&P/TSX to
new heights. In Canada, inflation recently fell below the central bank's
target, attesting to the effectiveness of monetary policy. However,
restrictive interest rates have severely limited growth in the Canadian
economy, and the labour market has suffered as a result. Against this
backdrop, the Bank of Canada is expected to continue its cycle of monetary
easing in the months ahead in order to breathe new life into the Canadian
economy. Lower interest rates, combined with marginal growth in house prices,
have slightly improved affordability in recent quarters. However, the Canadian
real estate market remains largely out of reach to first-time buyers. Consumer
confidence has improved in recent months due to a lower inflation rate and
interest rate cuts, but it nevertheless remains below the historical
average.
The economic environment in 2024 and the outlook for 2025 are discussed in
more detail in the Economic Review and Outlook section on page 24.
Objectives and Strategic Priorities
One of the organization's main priorities in its three-year plan is to
stimulate accelerated growth in savings and investment. This ambition is part
of a changing economic environment, shaped by major industry trends. On the
one hand, the need for differentiation is becoming crucial in a sector where
consolidation is increasingly taking place. On the other hand, adapting to
demographic changes and specific financial behaviors is an unavoidable
challenge. In addition, evolving governance and regulatory tightening impose
new requirements. Finally, emerging technologies, which could change ways of
working, offer the organization strategic opportunities to position itself at
the forefront of the industry.
2024 Achievements and Highlights 2025 Priorities
Continue to develop our distribution model by positioning advisors for success
› Continued our recruitment program for wealth advisors designed to › Maintain strong growth momentum through our successful recruitment
attract experienced teams and talent. This strategic approach addresses the program.
multi-generational needs of our clients while creating a collaborative and
dynamic environment between teams. › Continue the generational transition of wealth management
advisors, while providing enhanced support to existing advisors in developing
› Develop internal tools to improve the end-to-end advisor their teams.
experience and support advisors in their service offerings to their clients.
› Continue to pay special attention to increasing our representation
of women and minorities across our teams.
Move to an integrated digital platform to facilitate independent firms
activities
› Launched a simplified, fully integrated digital platform designed › Continue our business development by leveraging our new digital
to specifically meet the needs of our customers as well as the requirements of platform as a key growth driver.
independent institutions. The launch of this platform is proceeding
progressively, in close collaboration with our customers, to ensure a smooth › Continuously simplify and improve this new platform, by closely
transition adapted to their needs. aligning it with the evolving needs of our customers.
2024 Achievements and Highlights 2025 Priorities
Leveraging our open architecture and functionalities to offer partnership
opportunities and turnkey solutions for fund creation and management
› Business development for these turnkey solutions showing › Continue to expand our offering through strategic partnerships and
encouraging potential, with favourable returns from potential partners. turnkey solutions for investment product creation.
› Enhanced our offering of responsible and non-traditional › Continue to develop new investment solutions adapted to our
investment products, supported by the expertise of our teams specializing in clients' evolving needs, particularly in the areas of responsible investing,
these areas. ETFs and private placements.
› Implementation of a solution for the management and processing of › Prioritize information technology. investments required to serve
ETFs. independent fund companies.
Leverage our organizational synergies to maximize the potential of our
internal and external distribution channels
› Strong net dynamic sales of savings and investments in our Retail › Capture the full potential of partnership opportunities with NBIN
Network. and various industry players.
› Record results in terms of referrals to our internal partners › Introduce new solutions in our distribution channels in
meeting the needs and expectations of our clients. partnership with Financial Markets.
› Improved advisory interactions by focusing on training, deploying › Enhance customer experience across our digital channels for
new planning tools and optimizing our service delivery model. account opening and investment transactions.
› Strong momentum working with Financial Markets to create new
investment products.
Segment Results - Wealth Management
Year ended October 31
(millions of Canadian dollars) 2024 2023 % change
Net interest income 833 778 7
Fee-based revenues 1,603 1,432 12
Transaction and other revenues 350 311 13
Total revenues 2,786 2,521 11
Non-interest expenses 1,633 1,534 6
Income before provisions for credit losses and income taxes 1,153 987 17
Provisions for credit losses (1) 2
Income before income taxes 1,154 985 17
Income taxes 317 271 17
Net income 837 714 17
Less: Specified items after income taxes((1)) - (32)
Net income - Adjusted((1)) 837 746 12
Average assets((2)) 9,249 8,560 8
Average loans and acceptances((2)) 8,204 7,582 8
Net impaired loans((3)) 11 8 38
Average deposits((2)) 42,361 40,216 5
Efficiency ratio((3)) 58.6 % 60.8 %
Efficiency ratio - Adjusted((4)) 58.6 % 59.1 %
Assets under administration((3)) 766,082 652,631 17
Assets under management((3))
Individual 95,297 72,245 32
Mutual funds 60,603 48,613 25
155,900 120,858 29
(1) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP financial measures. During fiscal 2023, the
segment had recorded, in the Non-interest expenses item, $8 million in
intangible asset impairment losses ($6 million net of income taxes) on
technology development as well as $35 million in litigation expenses ($26
million net of income taxes) to resolve litigations and other disputes on
various ongoing or potential claims against the Bank.
(2) Represents an average of the daily balances for the period.
(3) See the Glossary section on pages 130 to 133 for details on the
composition of these measures.
(4) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP ratios.
Financial Results
In the Wealth Management segment, net income totalled $837 million in fiscal Assets Under Administration
2024 compared to $714 million for 2023, an 17% increase that was attributable
to growth in the segment's total revenues, partly offset by higher and Assets Under Management
non-interest expenses. Excluding the specified items recorded in fiscal 2023,
adjusted net income increased 12% from $746 million in 2023. The segment's Year ended October 31
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%, (millions of Canadian dollars)
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 2023 2024
other revenues were up 13% compared to fiscal 2023 due to increased client
activity in fiscal 2024.
Assets under administration
The segment's non-interest expenses stood at $1,633 million in fiscal 2024 Assets under management
compared to $1,534 million in fiscal 2023, a 6% increase that was due to
higher variable compensation and external management fees in line with revenue
growth, as well as greater technology investments related to the segment's
initiatives. These increases were partly offset by the impact of the specified
items of $43 million recorded in fiscal 2023. At 58.6% in fiscal 2024, the
efficiency ratio improved from 60.8% in fiscal 2023. Adjusted non-interest
expenses were $1,633 million, up 10% from $1,491 million in fiscal 2023. The
adjusted efficiency ratio stood at 58.6%, an improvement of 0.5 percentage
point compared to 59.1% in fiscal 2023.
Wealth Management recorded recoveries of credit losses of $1 million in fiscal
2024, while it had recorded provisions for credit losses of $2 million in
fiscal 2023.
Financial Markets
The Financial Markets segment offers a complete suite of products and services
to corporations, institutional clients, and public-sector entities. Whether
providing comprehensive advisory services and research or capital markets
products and services, the segment focuses on relationships with clients and
their growth. Over 900 specialists serve clients through its offices in North
America, Europe, the UK, and Asia.
Total Revenues by Category Total Revenues by Geographic Distribution
Year ended October 31, 2024 Year ended October 31, 2024
Global Markets (2023: 56%) Province of Quebec (2023: 19%)
Corporate and Investment Banking (2023: 44%) Other provinces (2023: 49%)
Outside of Canada (2023: 32%)
Key Success Factors
› Pan-Canadian franchise with established leadership in government
debt underwriting and ETF market-making in addition to securities lending and
recognized capabilities in risk management solutions, structured products, and
equity derivatives.
› Client-centric business with a differentiated and diversified
revenue mix.
› Sound risk management.
› Flexible approach to capital allocation and proven ability to
adapt to evolving capital market conditions and to deliver consistent
financial performance.
› Entrepreneurial culture: Integrated approach, teamwork, and
alignment among all groups, including other segments of the Bank.
Global Markets
Financial Markets is a Canadian leader in risk management solutions,
structured products, and market-making in ETFs by volume. The segment offers
solutions in the areas of fixed-income securities, currencies, equities, and
commodities in order to mitigate the financial and business risks of clients.
It also provides new product development expertise to asset managers and fund
companies and supports their success by providing liquidity, research, and
counterparty services. Financial Markets also provides tailored investment
products across all asset classes to institutional and retail distribution
channels.
Corporate and Investment Banking
Financial Markets provides corporate banking, advisory, and capital markets
services. It offers loan origination and syndication to large corporations for
project financing, merger and acquisition transactions, and corporate
financing solutions. The segment is also an investment banking leader in
Quebec and across Canada. Its comprehensive services include strategic
advisory for financing and merger and acquisition initiatives as well as for
debt and equity
underwriting. It is the Canadian leader in government debt and corporate
high‑yield debt underwriting. Dominant in Quebec, the segment is the leader
in debt underwriting for provincial and municipal governments across Canada
while growing its national position in infrastructure and project financing.
Financial Markets is active in securitization financing, mainly mortgages
insured by the Government of Canada and mortgage-backed securities.
Economic and Market Review
The U.S. economy has continued to perform well in 2024, but many other
economies -notably those of Europe and China- have been adversely affected by
restrictive global interest rates. The good news is that many central banks
were able to begin easing monetary policy as inflation rates fell. With prices
now growing at a pace below 2%, the Bank of Canada is expected to celebrate
victory in its battle against inflation and continue steadily lowering its
policy rate to neutralize monetary policy as soon as possible. However,
significant signs of economic weakness are already apparent, with preliminary
third-quarter data showing that the Canadian economy continues to grow at a
pace below its potential, a trend noted since 2022. At the same time, the
labour market shows no signs of stabilizing, as evidenced by the continuing
decline in the employment rate and the number of private sector job postings.
Falling interest rates may spur renewed strength in the Canadian economy in
2025, but these gains will be partly offset by the massive drop in
immigration. As for the geopolitical context, much uncertainty remains, with
armed conflicts continuing in the Middle East and Ukraine as well as the rise
to power of Donald Trump.
The policies of the future U.S. administration, such as the possible
imposition of new tariffs, could have adverse effects on some of the country's
trading partners. Given the geopolitical situation and monetary policies that
remain restrictive in many countries, there is a risk of increased volatility
in 2025.
The economic environment in 2024 and the outlook for 2025 are discussed in
more detail in the Economic Review and Outlook section on page 24.
Objectives and Strategic Priorities
2024 Achievements and Highlights 2025 Priorities
Maintain our leadership in established businesses and leverage our strengths › Ranked number one in Canadian government debt underwriting for a › Maintain our leadership through quality and innovation.
onto other businesses tenth consecutive year.
› As a leader in the high yield market domestically, spearheaded
Chemtrade Logistics Inc.'s inaugural $250 million 5-year senior unsecured note
offering by acting as lead left bookrunner. The offering was upsized due to
strong demand and provided Chemtrade Logistics Inc. with a new and alternative
borrowing platform to complement their historical convertible debenture
issuances.
› Financial advisor to Enbridge Inc. on the $3.1 billion sale of its
interest in Alliance Pipeline and Aux Sable to Pembina Pipeline Corporation.
Alliance Pipeline is the sole rich gas pipeline for Canadian producers
spanning from northeastern British Columbia to Channahon, Illinois. Aux Sable
is one of the largest Liquefied Natural Gas (LNG) complexes in North America
located at the terminus of Alliance Pipeline. The assets provide access to
world-class, long-life resources from the Western Canadian Sedimentary Basin
to premium markets in the U.S. and beyond.
› First time joint lead on a $2 billion Government of Canada
reopening of the 3.50% green bonds due March 1, 2034.
› First time joint bookrunner on a new US$4 billion International
Development Association 4.375% sustainable bond due June 11, 2029.
› Won Best Technology at the 2024 Structured Products Intelligence
Awards.
› Received seven awards at the 2024 Canadian ETF Express awards,
including two new wins in the following categories:
· Best Capital Markets Team in Canada
· Best Retail ETF Broker in Canada
2024 Achievements and Highlights 2025 Priorities
Carry on international expansion supported by an innovative offering
› Continued U.S. coverage enhancement in key sectors and › Assist our clients in their growth ambitions and funding
distribution of select products. needs.
› Enhanced our product offering in continental Europe
› Financial advisor to the special committee of Filo Corp. on
its $4.5 billion sale to BHP and Lundin Mining Corporation (Lundin Mining).
Concurrent with the transaction, BHP and Lundin Mining will form a Canadian
50%/50% joint venture into which Filo del Sol, a world-class
copper-gold-silver asset owned by Filo Corp., and the Josemaria copper-gold
project, owned by Lundin Mining, will be contributed, allowing for their joint
development in the prolific Vicuña district. Also provided a fairness opinion
to the special committee, ensuring the transaction terms reflected a fair
market value for Filo Corp.'s shareholders.
› Acted as administrative agent, joint bookrunner and co-lead
arranger on TMX Group Limited's (TMX) new US$1 billion bank financing package
in support of its acquisition of VettaFi Holdings LLC (VettaFi). The bank
financing package consisted of a US$600 million 12-month term loan, a US$200
million 18-month term loan and a US$200 million term loan of which US$963
million was drawn at closing. In addition, acted as joint bookrunner on a
successful $1.1 billion senior unsecured bond take-out financing for TMX with
net proceeds primarily used to repay a portion of outstanding indebtedness
incurred in connection with the acquisition of VettaFi.
Ensure continued growth by recruiting, coaching, and retaining a diversified › Continued to advance our Inclusion, Diversity and Equity strategy › Implement innovative practices for employee recruitment,
workforce through an expanded scholarship program and various training programs. coaching, and retention while fostering inclusion.
› Coached and retained our talent at all levels through mentorship,
executive development programs and workshops.
Further strengthen information technology to enhance and accelerate our › Invested in technology and talent to deploy technology › Continue to create differentiated technology across all Financial
execution enhancements. Markets' business lines.
› Used the latest advances in deep learning to automate and scale
our platform.
Strengthen our ability to deliver integrated advice and solutions to clients
› Exclusive financial advisor to nesto in its acquisition of CMLS › Deepen our relationships with corporations, institutional clients,
Group to establish the largest technology-enabled lender in Canada, enhancing and public-sector entities and help support their growth.
both residential and commercial mortgage services. Also acted as co-lead
arranger and joint bookrunner on the bank financing related to the acquisition › Integrate environmental, social and governance (ESG)
while NAventures participated in the equity financing. considerations in relevant Financial Markets activities.
› Acted as an initial coordinating lead arranger, joint bookrunner
and co-green loan structuring agent, pre-hedge and hedge provider, and Letter
of Credit provider, by providing an underwriting of US$775 million on the
US$8.8 billion financing of a 3.5 GW wind project and 553 miles in
transmission lines known as SunZia. SunZia is being developed by a leading
power developer, Pattern Energy Group LP, which is a portfolio company of
Canadian Pension Plan Investment Board, and is amongst the largest clean
energy infrastructure project in U.S. history. It is expected to offset more
than 7.5 million metric tons of CO(2) on the electric grid annually, equal to
nearly 0.5% of greenhouse gas emissions from the U.S. electric power sector.
2024 Achievements and Highlights 2025 Priorities
Strengthen our ability to deliver integrated advice and solutions to clients › Exclusive financial advisor, joint bookrunner, administrative
(cont.) agent, and hedge provider for a $248.1 million construction term loan to
support SkyLink Guideway Partners (Dragados Canada, Inc and Ledcor Investments
Inc.) on the 3.9-year public private partnership to design, build, and finance
the Surrey Langley SkyTrain Project: Guideway Contract in Surrey, British
Columbia. This is one of three contracts to deliver the $6 billion
Surrey-Langley SkyTrain extension project.
› Prominent role in the inaugural South Bow Corporation
$1.45 billion (joint bookrunner on the Canadian dollar tranches) and US$4.75
billion debt offering related to the spin off of South Bow Corporation from TC
Energy Corporation, creating two independent, investment-grade companies.
› Through collaborative efforts within Corporate and Investment
Banking and Risk Management Solutions groups, acted as joint-bookrunner on
$500 million, US$1.5 billion and €1.35 billion of senior unsecured notes for
Alimentation Couche-Tard Inc. following their acquisition of certain European
assets of TotalEnergies. Proceeds were used to repay the credit facilities
that had been put in place following the acquisition (total transaction size
of €3.1 billion).
› Sponsored the annual Bloomberg Canadian Finance Conference for the
twelfth year in a row.
Segment Results - Financial Markets
Year ended October 31
(taxable equivalent basis)((1))
(millions of Canadian dollars) 2024 2023 % change
Global markets
Equities 1,018 904 13
Interest rate and credit 573 417 37
Commodities and foreign exchange 198 173 14
1,789 1,494 20
Corporate and investment banking 1,241 1,162 7
Total revenues((1)) 3,030 2,656 14
Non-interest expenses 1,246 1,161 7
Income before provisions for credit losses and income taxes 1,784 1,495 19
Provisions for credit losses 54 39 38
Income before income taxes 1,730 1,456 19
Income taxes((1)) 476 401 19
Net income 1,254 1,055 19
Less: Specified items after income taxes((2)) − (5)
Net income - Adjusted((2)) 1,254 1,060 18
Average assets((3)) 195,881 180,837 8
Average loans and acceptances((3)) (Corporate Banking only) 31,887 29,027 10
Net impaired loans((4)) 78 30
Net impaired loans as a % of total loans and acceptances((4)) 0.2 % 0.1 %
Average deposits((3)) 65,930 57,459 15
Efficiency ratio((4)) 41.1 % 43.7 %
Efficiency ratio - Adjusted((5)) 41.1 % 43.4 %
(1) The Total revenues and Income taxes items of the Financial Markets
segment are presented on a taxable equivalent basis. Taxable equivalent basis
is a calculation method that consists in grossing up certain revenues taxed at
lower rates by the income tax to a level that would make it comparable to
revenues from taxable sources in Canada. For the year ended October 31, 2024,
Total revenues were grossed up by $376 million ($571 million in 2023), and an
equivalent amount was recognized in Income taxes. The effect of these
adjustments is reversed under the Other heading of segment results. In light
of the enacted legislation with respect to Canadian dividends, the Bank did
not recognize an income tax deduction or use the taxable equivalent basis
method to adjust revenues related to affected dividends received after January
1, 2024 (for additional information, see the Income Taxes section).
(2) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP financial measures. During fiscal 2023, the
segment had recorded, in the Non-interest expenses item, $7 million in
intangible asset impairment losses ($5 million net of income taxes) on
technology development.
(3) Represents an average of the daily balances for the period.
(4) See the Glossary section on pages 130 to 133 for details on the
composition of these measures.
(5) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP ratios.
Financial Results
In the Financial Markets segment, net income totalled $1,254 million in fiscal
2024, up 19% compared to 2023. 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, Total Revenues by Category
a 37% increase in interest rate and credit revenues, and a 14% increase in
commodities and foreign exchange revenues. In addition, corporate and Year ended October 31
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, (millions of Canadian dollars)
partly offset by lower revenues from merger and acquisition activity.
For the year ended October 31, 2024, non-interest expenses rose 7% compared to 2023 2024
the prior year. This increase was due to higher compensation and employee
benefits, notably variable compensation resulting from revenue growth, as well
as higher technology expenses and other expenses related to the segment's
business growth. The efficiency ratio of 41.1% in fiscal 2024 improved from Global markets - Equities
43.7% in fiscal 2023.
Global markets - Fixed income
Global markets - Commodities and
Financial Markets recorded provisions for credit losses of $54 million during
fiscal 2024 compared to $39 million in 2023. This growth was mainly due to a foreign exchange
$31 million increase in provisions for credit losses on impaired loans, partly
offset by a $16 million decrease in provisions for credit losses on Corporate and investment banking
non-impaired loans, mainly due to the favourable impact of updated
macroeconomic scenarios.
Total Revenues by Category
Year ended October 31
(millions of Canadian dollars)
2023 2024
Global markets - Equities
Global markets - Fixed income
Global markets - Commodities and
foreign exchange
Corporate and investment banking
U.S. Specialty Finance and International
The Bank complements its Canadian growth with a targeted, disciplined
international strategy that aims for superior returns. The Bank is currently
focused on specialty finance in the U.S. through its Credigy subsidiary and on
personal and commercial banking in Cambodia through its ABA Bank subsidiary.
The Bank also holds minority positions in financial groups operating in
French-speaking Africa and Africa-Asia. The Bank currently has a moratorium on
any new significant investments in emerging markets. During fiscal 2024, the
U.S. Specialty Finance and International (USSF&I) segment generated 12% of
the Bank's consolidated total revenue and 17% of its net income.
Credigy Breakdown of Total Revenues ABA Bank
Year ended October 31, 2024
Credigy (2023: 40%)
ABA Bank (2023: 60%)
International (2023: 0%)
U.S. Specialty Finance - Credigy
Key Success Factors
› Proven investment strategy that is adaptable to rapidly changing
market conditions.
› Diversification across several classes of performing assets.
› Market credibility achieved through 380-plus transactions and over
US$28 billion in total investments life-to-date.
› Rigorous underwriting approach with continuous refinement of
modelling and analytics capabilities.
› Resilience to unfavourable economic conditions owing to credit
quality and structural enhancements that provide downside protection.
› Emphasis on recruiting and retaining exceptional talent.
Founded in 2001 and based in Atlanta, Georgia, Credigy is a specialty finance
company primarily active in financing and acquiring a diverse range of
performing assets. Its portfolio is mostly comprised of diversified secured
consumer receivables in the U.S. market. Through its best-in-class modelling
expertise, flexibility, and client-centric approach, Credigy is a partner of
choice for financial services institutions.
Economic and Market Review
The U.S. economy continues to stand out for its resilience, posting vigorous
growth despite uncertainties. GDP grew at an annualized rate of 2.8% in the
third quarter, driven in particular by a marked acceleration in public
spending. This dynamism contradicted the IMF's April projections, which
forecasted an improvement in the structural deficit of U.S. public finances in
2024. At the same time, household consumption rose by a considerable 3.7%
annualized rate to its highest level in a year and a half. However, this
strength masks growing areas of weakness, such as a historically low savings
rate and an
increase in payment defaults. These signals suggest that household spending
trends in the months ahead will be closely tied to labour market conditions.
On this front the picture is more nuanced, as the unemployment rate has risen
slightly in recent months, even though it remains low in historical terms.
However, a growing number of workers are reporting that it is becoming
increasingly difficult to find a job in an environment where companies, faced
with falling sales, are making this their main concern. The Republican sweep
of the presidential elections suggests that extravagant government spending
may continue. However, its impact on the economy may be offset by higher than
previously estimated interest rates due to the inflation that could be
generated by budgetary support.
The economic environment in 2024 and the outlook for 2025 are discussed in
more detail in the Economic Review and Outlook section on page 24.
Objectives and Strategic Priorities - Credigy
Credigy aims to provide customized solutions for the acquisition or financing
of consumer assets in pursuit of the best risk-adjusted returns and a pre-tax
return on assets (ROA) of at least 2.5%.
2024 Achievements and Highlights 2025 Priorities
Sustain deal flow by being a partner of choice for institutions facing complex
challenges and strategic changes
› Achieved double-digit balance sheet growth through a disciplined › Leverage relationships with current and prospective partners.
investment approach.
› Remain prepared to seize opportunities in rapidly evolving
› Invested by establishing new relationships and leveraging existing markets.
partners.
› Maintained average assets of approximately $11.3 billion.
Maintain a diversified mix of performing assets
› Continued asset class diversification that is focused on › Favour asset diversification and a prudent investment profile.
high-quality consumer, mortgage, and insurance assets.
› Maintain a stable risk-reward balance while optimizing for capital
› Leveraged flexibility to invest in a balanced mix of financing and efficiency.
direct acquisitions.
Achieve best risk-adjusted returns
› Actively monitored the economy for opportunities. › Actively monitor macroeconomic conditions to implement risk
mitigation strategies.
› Refined and calibrated credit models to target the best
risk-return investments. › Deliver asset growth through a balanced mix of financing and
direct acquisitions.
International - ABA Bank
Established in 1996, ABA Bank provides financial services to individuals and
businesses in Cambodia. It is now the largest by assets and the fastest
growing commercial bank in Cambodia. ABA Bank offers a full spectrum of
financial services to micro, small and medium enterprises (MSMEs) as well as
to individuals through 99 branches, 46 self-banking units, 1,599 automated
teller machines (ATMs) and other self-service machines, and advanced online
banking and mobile banking platforms. It has been selected as the Best Bank in
Cambodia by financial magazines The Banker, Global Finance (tenth consecutive
year), Euromoney (eleventh consecutive year) and Asiamoney among others.
Economic and Market Review
The Cambodian economy is slowly recovering from the economic slowdown in China
and weaker global external demand, in particular from the U.S. and Europe.
Tourism is picking up, but generated revenues are still well below 2019
levels. After being impacted by global macroeconomic conditions in 2023,
exports are showing good signs with strong growth in both garments, footwear
and textiles, and agriculture while benefiting from recent free-trade
agreements((1)) and from the diversification of the manufacturing sector.
The economy grew by 5.1% in 2023 and is expected to grow between 5.5% and 6.0%
in 2024. In 2025, the growth rate is anticipated to be between 5% and 6%.
Cambodia will continue to benefit from increased regional economic integration
among ASEAN Member States. The Cambodian market is underbanked; there is a
high adoption and use of mobile applications and social media in the country,
and over 65% of the population of 17 million is under 35 years of age.
(1) Comprehensive Trade Partnership between the Association of Southeast
Asian Nations (ASEAN), Australia, New Zealand, Brunei Darussalam, China and
Japan; agreement between Cambodia and China; agreement between Cambodia and
South Korea.
Objectives and Strategic Priorities - ABA Bank
ABA Bank is pursuing an omnichannel banking strategy with the goal of becoming
the lending partner of choice to MSMEs while increasing market penetration in
deposits and transactional services for retail and business clients.
2024 Achievements and Highlights 2025 Priorities
Grow market share in MSME lending
› Achieved 17% growth in loan volumes. › Open 5 branches and 5 self-banking units in 2025 to extend its
reach in Cambodia, continue modernizing its branch network, and gain direct
› Maintained its leading market position while continuing to grow access to a larger pool of MSME customers and retail deposits.
the business.
› Focus on MSME clients in industries that have been less affected
› Continued to adapt the MSME lending strategy to support the by the current economic slowdown.
growing needs of customers as their businesses become more mature.
› Continue to adapt the lending strategy in line with the growing
› Opened twelve new branches, bringing the total to 99 throughout needs of MSME customers as their businesses become more mature.
the country.
Maintain credit quality
› Maintained a well-diversified portfolio (98% of loans are secured › Maintain strong governance, disciplined risk management, and sound
with an average loan-to-value between 40 and 50). business processes.
› At 5.5% of the loan portfolio as at October 31, 2024, › Ensure good credit quality across the loan portfolio to keep
non-performing loans remain below market average. non-performing loan levels below market averages.
› Closely monitored clients that are impacted by the current › Continue to focus on secured lending.
economic slowdown.
› Pro-actively work with clients to minimize growth of
› Standard & Poor's maintained ABA Bank's long-term credit non-performing loans and facilitate settlements while ensuring proper enablers
rating at B+ with a "Stable" outlook, as the rapid loan and deposit growth are in place (tools, staff, training).
continues, and asset quality deterioration remains manageable.
Sustain growth in deposits and transactional services
› Grew deposit volume by 21% from 2023. › Further develop the transactional banking model to accelerate the
migration of cash transactions, payments, and money transfers to self-service
› Continued to enhance self-banking capabilities, including the and digital banking channels.
market-leading full-scale mobile banking application in Cambodia.
› Adapt the product offering to support the growth of ABA Bank's
› Self-banking transactions made up 99% of total transactions. clients and their evolving needs.
› Further expanded ABA 24/7, a network of standalone self-banking › Increase the deposit base by providing convenience to retail
locations that provide customers with round-the-clock access to their accounts customers through an advanced digital and self-banking infrastructure and by
and that now has 46 locations throughout the country. expanding the network of self-service locations.
Segment Results - USSF&I
Year ended October 31
(millions of Canadian dollars) 2024 2023 % change
Total revenues
Credigy 544 483 13
ABA Bank 860 726 18
International 11 −
1,415 1,209 17
Non-interest expenses
Credigy 144 140 3
ABA Bank 293 260 13
International 2 2
439 402 9
Income before provisions for credit losses and income taxes 976 807 21
Provisions for credit losses
Credigy 113 81 40
ABA Bank 68 32
International 1 −
182 113 61
Income before income taxes 794 694 14
Income taxes
Credigy 60 55 9
ABA Bank 105 91 15
International 1 −
166 146 14
Net income
Credigy 227 207 10
ABA Bank 394 343 15
International 7 (2)
628 548 15
Average assets((1)) 27,669 23,007 20
Average loans and receivables((1)) 21,733 18,789 16
Purchased or originated credit-impaired (POCI) loans 365 511 (29)
Net impaired loans excluding POCI loans((2)) 550 283 94
Average deposits((1)) 12,987 10,692 21
Efficiency ratio((2)) 31.0 % 33.3 %
(1) Represents an average of the daily balances for the period.
(2) See the Glossary section on pages 130 to 133 for details on the
composition of these measures.
Financial Results
In the USSF&I segment, net income totalled $628 million in fiscal 2024
compared to $548 million in fiscal 2023, an increase of 15% stemming from
growth in total revenues partly offset by higher non-interest expenses and
higher provisions for credit losses. The 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.
Non-interest expense totalled $439 million for fiscal 2024, compared to
$402 million for fiscal 2023. The 9% increase resulted primarily from
higher non-interest expenses at ABA Bank driven by business growth.
The segment's provisions for credit losses were up $69 million from
fiscal 2023.
Credigy
For fiscal 2024, Credigy reported net income of $227 million, up 10% from
fiscal 2023 due to growth in total revenues, partially offset by higher
provisions for credit losses. The subsidiary posted income before provisions
for credit losses and income taxes totalling $400 million in fiscal 2024,
up 17% from fiscal 2023. Total revenues amounted to $544 million in
fiscal 2024, up 13% from $483 million in fiscal 2023. This increase was
driven by growth in loan volumes and non-interest income arising primarily
from a fair value remeasurement of certain portfolios and a realized gain in
fiscal 2024 from the disposal of a loan portfolio, partly offset by income
recognized as a result a credit facility prepaid in fiscal 2023. Non-interest
expenses for the year ended October 31, 2024 were up $4 million, compared
to fiscal 2023, owing primarily to compensation and employee benefits. The
subsidiary reported a year-over-year increase in provisions for credit losses
totalling $32 million, owing to higher provisions for credit losses on
impaired loans due to normal maturation of loan portfolios and provisions for
credit losses on POCI loans, partly offset by lower provisions for credit
losses on non-impaired loans.
ABA Bank
For fiscal 2024, ABA Bank recorded net income totalling $394 million, up
$51 million or 15% from fiscal 2023 owing to higher total revenues,
partially offset by higher non-interest expenses and provisions for credit
losses. The subsidiary posted income before provisions for credit losses and
income taxes amounting to $567 million in fiscal 2024, up 22% from
fiscal 2023. The 18% increase in the subsidiary's total revenues year over
year stemmed from business expansion at the subsidiary, driven mainly by
sustained asset growth. Non-interest expenses stood at $293 million, up 13%
from a year earlier, due to higher compensation and employee benefits and to
higher occupancy and technology costs driven by business growth and opening of
new branches. The subsidiary reported provisions for credit losses totalling
$68 million in fiscal 2024, up $36 million from fiscal 2023, owing to
higher provisions for credit losses on impaired loans, partly offset by lower
provisions for credit losses on non-impaired loans.
Average Loans and Receivables - Credigy Average Loans and Average Deposits - ABA Bank and International
Year ended October 31 Year ended October 31
(millions of Canadian dollars) (millions of Canadian dollars)
2023 2024 2023 2024
Loans Loans
POCI loans Deposits
Other
The Other heading reports on Treasury operations; liquidity management; Bank
funding; asset and liability management; the activities of the Flinks
subsidiary, a fintech company specialized in financial data aggregation and
distribution; certain specified items; and the unallocated portion of
corporate units. Corporate units include Technology and Operations, Risk
Management, Employee Experience, and Finance. These units provide advice and
guidance throughout the Bank and to its business segments in addition to
expertise and support in their respective fields.
Segment Results - Other
Year ended October 31
(millions of Canadian dollars) 2024 2023
Net interest income((1)) (335) (591)
Non-interest income((1)) (169) (141)
Total revenues (504) (732)
Non-interest expenses 250 194
Income (loss) before provisions for credit losses and income taxes (754) (926)
Provisions for credit losses (1) 5
Income (loss) before income taxes (753) (931)
Income taxes (recovery)((1)) (507) (667)
Net loss (246) (264)
Non-controlling interests (1) (2)
Net loss attributable to the Bank's shareholders and holders of other equity (245) (262)
instruments
Less: Specified items after income taxes((2)) 100 12
Net loss − Adjusted((2)) (346) (276)
Average assets((3)) 65,546 69,731
(1) For the year ended October 31, 2024, Net interest income was
reduced by $79 million ($332 million in 2023), Non-interest income was
reduced by $306 million ($247 million in 2023), and an equivalent amount was
recorded in Income taxes (recovery). These adjustments include a reversal of
the taxable equivalent of the Financial Markets segment and the Other heading.
Taxable equivalent basis is a calculation method that consists of grossing up
certain revenues taxed at lower rates by the income tax to a level that would
make it comparable to revenues from taxable sources in Canada. In light of the
enacted legislation with respect to Canadian dividends, the Bank did not
recognize an income tax deduction, nor did it use the taxable equivalent basis
method to adjust revenues related to affected dividends received after January
1, 2024 (for additional information, see the Income Taxes section).
(2) See the Financial Reporting Method section on pages 14 to 20 for
additional information on non-GAAP financial measures. During the year ended
October 31, 2024, after the agreement to acquire CWB was concluded, the Bank
recorded several acquisition-related items, in particular the amortization of
the subscription receipt issuance costs of $14 million ($10 million net of
income taxes); a gain of $174 million ($125 million net of income taxes)
resulting from the remeasurement at fair value of the CWB common shares
already held by the Bank; the impact of managing fair value changes,
representing a loss of $3 million ($2 million net of income taxes); and $18
million in acquisition and integration charges ($13 million net of income
taxes). During fiscal year 2023, the Bank had recorded a $91 million gain ($67
million net of income taxes) upon the fair value measurement of an equity
interest, a $25 million expense ($18 million net of income taxes) related to
the retroactive impact of changes to the Excise Tax Act, $12 million in
impairment losses ($9 million net of income taxes) on premises and equipment
and intangible assets, $6 million in charges ($4 million net of income taxes)
for penalties on onerous contracts, and a $24 million tax expense related to
the Canadian government's 2022 tax measures.
(3) Represents an average of the daily balances for the period.
Financial Results
For the Other heading of segment results, there was a net loss
of $246 million in fiscal 2024 compared to a net loss of $264 million in
fiscal 2023. The change in net loss resulted from a higher contribution from
Treasury activities owing to a rise in investment gains in 2024, including
the gain resulting from the remeasurement at fair value of the CWB common
shares held by the Bank ($125 million net of income taxes). Those positive
items were offset by higher non-interest expenses compared to fiscal 2023
driven by increased compensation and employee benefits related to the Bank's
revenue growth, as well as CWB acquisition and integration charges. The
fiscal 2024 specified items related to the CWB acquisition agreement had a
$100 million favourable impact on the net loss compared to a $12 million
favourable impact from the fiscal 2023 specified items. The adjusted net loss
stood at $346 million for fiscal 2024 compared to $276 million for
fiscal 2023.
Quarterly Financial Information
Several trends and factors have an impact on the Bank's quarterly net income,
revenues, non-interest expenses and provisions for credit losses. The
following table presents a summary of results for the past eight quarters.
Quarterly Results Summary((1))
(millions of Canadian dollars) 2024 2023((2))
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Statement of income data
Net interest income 784 769 635 751 735 870 882 1,099
Non-interest income 2,160 2,227 2,115 1,959 1,825 1,620 1,564 1,463
Total revenues 2,944 2,996 2,750 2,710 2,560 2,490 2,446 2,562
Non-interest expenses 1,592 1,541 1,472 1,449 1,597 1,404 1,362 1,390
Income before provisions for credit losses and
income taxes 1,352 1,455 1,278 1,261 963 1,086 1,084 1,172
Provisions for credit losses 162 149 138 120 115 111 85 86
Income taxes 235 273 234 219 97 145 167 210
Net income 955 1,033 906 922 751 830 832 876
(1) For additional information about the 2024 fourth-quarter results,
visit the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca to
consult the Bank's Press Release for the Fourth Quarter of 2024, published on
December 4, 2024. Also, a summary of results for the past 12 quarters is
provided in Table 1 on pages 120 and 121 of this MD&A.
(2) For the 2023 comparative figures, certain amounts have been adjusted
to reflect accounting policy changes arising from the adoption of IFRS 17. For
additional information, see Note 2 to the Consolidated Financial Statements.
The analysis of the past eight quarters reflects the sustained performance of
all the business segments and helps readers identify the items that have
favourably or unfavourably affected results. Net income for all quarters
of 2024 was higher than in the corresponding periods of 2023. The increase
in net income was fuelled by strong performance in all business segments owing
to growth in total revenues, partly offset by higher non-interest expenses
(excluding the fourth quarter) and higher provisions for credit losses.
Net interest income in every quarter of 2024, except the fourth quarter, was
down from the corresponding quarters of 2023. These decreases stemmed
primarily from trading activity revenues in the Financial Markets segment. In
all other business segments, net interest income was up in all quarters
of 2024 compared to the corresponding quarters of 2023 (except for the
first quarter in the Wealth Management segment, when a change in the
composition of deposits had an unfavourable impact). These increases were
driven by loan and deposit growth in the Personal and Commercial segment, the
impact of rate increases and deposit volume growth in the Wealth Management
segment, loan portfolio growth at Credigy, sustained asset growth at
ABA Bank, and dividend income in the first and second quarters of 2024
related to an investment in a financial group.
For all quarters of 2024, non-interest income was up from the corresponding
quarters of 2023, driven primarily by trading activity revenues in the
Financial Markets segment, boosting non-interest income in every quarter
of 2024. These increases were also fuelled by growth in insurance and credit
card revenues. The Wealth Management segment reported sharp increases in
non-interest income for all quarters of 2024, resulting primarily from higher
fee-based revenues related to stock market gains compared to the corresponding
quarters of 2023, and from positive net inflows into the various solutions.
Non-interest income in the USSF&I segment were up in all quarters
of 2024 compared to corresponding periods of 2023, except for the
fourth quarter, owing to revenue growth at ABA Bank driven by business
expansion and to higher revenues at Credigy. Non-interest income for the
third and fourth quarters of 2024 included gains on non-trading securities
upon remeasurement at fair value of the CWB shares held by the Bank, whereas
in the third quarter of 2023, a gain was recorded in other income to reflect
a fair value remeasurement of the Bank's equity interest in TMX. In addition,
transitioning from bankers' acceptances to loans indexed at CORRA adversely
affected non-interest income in the quarters of 2024.
Except for the fourth quarter, non-interest expense was up in every quarter
of 2024 from the corresponding periods a year earlier. These increases were
driven by compensation and employee benefits, particularly higher salaries,
and variable compensation tied to the Bank's revenue growth. Compared to the
corresponding periods of 2023, occupancy and technology expenses were up in
every quarter of 2024 except for the fourth quarter, owing to the
recognition of $86 million in impairment losses on premises and equipment and
intangible assets in the same period of 2023. The increases recorded in the
other quarters stemmed from expenses related to the Bank's new head office and
banking network expansion at ABA Bank, and from the Bank's significant
investments in technological enhancement. In addition, professional fees were
up in all quarters of fiscal 2024, owing primarily to higher external
management fees in the Wealth Management segment and CWB acquisition and
integration charges recorded in the third and fourth quarters of 2024. In
the third quarter of 2023, other expenses included a $25 million expense
related to the retroactive impact of changes to the Excise Tax Act, and in the
fourth quarter of 2023, the Bank recognized $35 million in litigation
expenses and $15 million in provisions for contracts.
Provisions for credit losses were up in every quarter of 2024 from the
corresponding periods of 2023. These increases stemmed from rises in
provisions for credit losses on impaired loans excluding POCI loans((1)) at
Personal Banking (including credit card receivables) amid a normalization of
credit performance and at Commercial Banking, as well as in the Financial
Markets and USSF&I segments. Provisions for credit losses on non-impaired
loans were down for all quarters owing to the more favourable impact of
updated macroeconomic scenarios and a greater deterioration in credit risk
during 2023 quarters, offset by the effects of the recalibration of certain
risk parameters and by loan portfolio growth. In addition, provisions for
credit losses on POCI loans in the third and fourth quarters were up from
the corresponding quarters of 2023 as a result of remeasurements of certain
portfolios at Credigy, while provisions for the first and second quarters
of 2024 were down following repayments of Commercial Banking POCI loans.
The year-over-year change in the quarterly effective tax rate in fiscal 2024
and 2023 resulted primarily from a lower level and proportion of tax-exempt
dividend income, which reflects the denial of the deduction in respect of
dividends contemplated by Bill C-59 since January 1, 2024, partly offset by
the impact of the Canadian government's 2022 tax measures recorded in the
first quarter of 2023, namely, the Canada Recovery Dividend and the
additional 1.5% tax on banks and life insurers.
(1) See the Glossary section on pages 130 to 133 for details on the
composition of these measures.
Analysis of the Consolidated Balance Sheet
Consolidated Balance Sheet Summary
As at October 31
(millions of Canadian dollars) 2024 2023((1)) % change
Assets
Cash and deposits with financial institutions 31,549 35,234 (10)
Securities 145,165 121,818 19
Securities purchased under reverse repurchase agreements and securities 16,265 11,260 44
borrowed
Loans and acceptances, net of allowances 243,032 225,443 8
Other 26,215 29,722 (12)
462,226 423,477 9
Liabilities and equity
Deposits 333,545 288,173 16
Other 101,873 110,972 (8)
Subordinated debt 1,258 748 68
Equity attributable to the Bank's shareholders and holders of other equity 25,550 23,582 8
instruments
Non-controlling interests − 2 (100)
462,226 423,477 9
(1) Certain amounts have been adjusted to reflect accounting policy
changes arising from the adoption of IFRS 17. For additional information, see
Note 2 to these audited Consolidated Financial Statements.
As at October 31, 2024, the Bank had total assets of $462.2 billion,
up $38.7 billion or 9% from $423.5 billion since the end of the previous
fiscal year.
Cash and deposits with financial institutions
Cash and deposits with financial institutions as at October 31, 2024 stood
at $31.5 billion, down $3.7 billion compared with the Consolidated Balance
Sheet as at October 31, 2023, owing primarily to a decline in deposits with
regulated financial institutions, notably the U.S. Federal Reserve, partly
offset by growth in deposits with the Bank of Canada. The Bank's liquidity and
funding risk management practices are described on pages 95 to 104 of
this MD&A.
Securities
Securities have risen $23.4 billion since October 31, 2023, owing to a
$15.9 billion or 16% increase in securities at fair value through profit or
loss driven mainly by equity securities, partly offset by declines in
securities issued or guaranteed by the Canadian government and securities
issued or guaranteed by the U.S. Treasury, other U.S. agencies and other
foreign governments. Securities other than those measured at fair value
through profit or loss were up $7.5 billion. Securities purchased under
reverse repurchase agreements and securities borrowed have increased
$5.0 billion since October 31, 2023, driven primarily by Financial Markets
segment and Treasury activities. The Bank's market risk management policies
are described on pages 88 to 94 of this MD&A.
Loans and Acceptances
As at October 31, 2024, loans and acceptances, net of allowances for credit
losses, accounted for 53% of total assets and totalled $243.0 billion,
up $17.6 billion or 8% since October 31, 2023.
Residential mortgage loans outstanding amounted to $95.0 billion as at
October 31, 2024, up $8.2 billion or 9% since October 31, 2023. This
growth was mainly driven by sustained demand for mortgage credit in the
Personal and Commercial segment and by the business activity at Financial
Markets and at ABA Bank and Credigy. Personal loans totalled $46.9 billion
at the end of fiscal 2024, up $0.5 billion from $46.4 billion as at
October 31, 2023. This increase was fuelled mainly by Personal Banking
business growth. Credit card receivables amounted to $2.8 billion, up
$0.2 billion since October 31, 2023.
As at October 31, 2024, business and government loans and acceptances
totalled $99.7 billion, up $8.9 billion or 10% since October 31, 2023.
The increase stemmed primarily from business growth in Commercial Banking and
the Wealth Management and Financial Markets segments, as well as at ABA Bank
and Credigy.
Among other information, Table 9 (page 127) shows gross loans by borrower
category as at October 31, 2024. Residential mortgages (including home
equity lines of credit) have posted strong growth since 2020 and amounted
to $104.7 billion as at October 31, 2024; they accounted for 43% of total
loans. The growth in residential mortgages was driven by sustained demand for
mortgage credit in the Personal and Commercial segment and by the business
activity at Financial Markets, ABA Bank, and Credigy. As at October 31,
2024, personal loans (including credit card receivables) totalled
$22.1 billion, up $1.4 billion since October 31, 2023. The key increases
in business loans were recorded in the mining, manufacturing, financial
services, real estate and real estate construction, and other services
categories. As at October 31, 2024, certain sectors were down year over year,
particularly professional services and education and health care. Since
October 31, 2023, POCI loans declined given the maturities of certain
portfolios as well as loan repayments in fiscal 2024.
Impaired Loans
Impaired loans include all loans classified in Stage 3 of the expected credit
loss model and POCI loans.
As at October 31, 2024, gross impaired loans stood at $2,043 million
compared to $1,584 million as at October 31, 2023 (Table 10, page 128).
Net impaired loans totalled $1,629 million as at October 31, 2024 compared
to $1,276 million as at October 31, 2023. Net impaired loans excluding
POCI loans rose $538 million to $1,144 million from $606 million as at
October 31, 2023. The increase resulted primarily from rises in net impaired
loans in the loan portfolios of Personal Banking and Commercial Banking,
Financial Markets, Credigy (excluding POCI loans) and ABA Bank. Net
POCI loans fell to $485 million as at October 31, 2024 from $670 million
as at October 31, 2023, owing to maturities of certain loan portfolios and
repayments.
A detailed description of the Bank's credit risk management practices is
provided on pages 78 to 87 of this MD&A as well as in Note 8 to the
Consolidated Financial Statements.
Other Assets
As at October 31, 2024, other assets totalled $26.2 billion, down
$3.5 billion from $29.7 billion as at October 31, 2023, resulting mainly
from a $5.2 billion decline in derivative financial instruments related to
Financial Markets business activities. The decrease was partly offset by a
$1.4 billion increase in other assets, particularly amounts due from clients,
dealers and brokers as well as receivables, prepaid expenses and other items.
Deposits
As at October 31, 2024, deposits stood at $333.5 billion, up $45.3 billion
or 16% since the previous fiscal year end. Accounting for 29% of all
deposits, personal deposits amounted to $95.2 billion, as shown in Table 12
(page 129), up $7.3 billion since October 31, 2023. The increase was
driven by business growth at Personal Banking, Financial Markets segments, and
at ABA Bank.
As shown in Table 12, business and government deposits totalled
$232.7 billion, up $35.4 billion from $197.3 billion as at
October 31, 2023. This increase stemmed from Financial Markets and Treasury
funding activities, including $5.8 billion in deposits subject to bank
recapitalization (bail-in) conversion regulations, as well as business
activities in the Commercial Banking and Wealth Management segments and at
ABA Bank, and $1.0 billion related to the investment agreements for
subscription receipts issued as part of the agreement to acquire CWB.
Deposits from deposit-taking institutions totalled $5.6 billion,
up $2.6 billion since the previous fiscal year-end.
Other Liabilities
As at October 31, 2024, other liabilities stood at $101.9 billion, down
$9.1 billion since October 31, 2023, resulting primarily from a
$6.6 billion decrease in acceptances, owing to the transition from bankers'
acceptances to loans indexed at CORRA, a $4.1 billion decrease in derivative
financial instruments, and a $2.8 billion decrease in obligations related to
securities sold short. The decreases were offset by a $3.4 billion increase
in liabilities related to transferred receivables and a $1.3 billion increase
in other liabilities, particularly accounts payable and accrued expenses as
well as interest and dividends payable.
Subordinated Debt and Other Contractual Obligations
Subordinated debt has risen since October 31, 2023 as a result of the
February 5, 2024 issuance of $500 million in medium-term notes. The
contractual obligations are detailed in Note 31 to the Consolidated Financial
Statements.
Equity
As at October 31, 2024, equity attributable to the Bank's shareholders and
holders of other equity instruments totalled $25.6 billion, up $2.0 billion
from $23.6 billion as at October 31, 2023. The increase stemmed from net
income net of dividends and the common share issuances under the Stock Option
Plan. The increases were partially offset by the net fair value change
attributable to credit risk on financial liabilities designated at fair value
through profit or loss and by the net change in gains (losses) on cash flow
hedges.
The Consolidated Statements of Changes in Equity on page 144 of this Annual
Report present the items that make up equity. In addition, an analysis of the
Bank's regulatory capital is presented in the Capital Management section of
this MD&A.
CWB Transaction
On June 11, 2024, the Bank entered into an agreement to acquire all of the
issued and outstanding common shares of Canadian Western Bank (CWB) by way of
a share exchange valuing CWB at approximately $5.0 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.
Between the announcement and closing of the transaction, the Bank is exposed
to changes in the fair value of CWB's assets and liabilities due to changes in
market interest rates. Increases in interest rates will impact the fair value
of net assets on closing of the transaction, increasing the amount of goodwill
and reducing capital ratios. To manage the volatility of goodwill and capital
on closing of the transaction, the Bank entered into interest rate swaps to
economically hedge its exposure. Mark-to-market changes have been recognized
in Non-interest income - Trading revenues (losses) in the Consolidated
Statement of Income.
Related Party Transactions
In the normal course of business, the Bank provides various banking services
and enters into contractual agreements and other transactions with associates,
joint ventures, directors, key officers and other related parties. These
agreements and transactions are entered into under conditions similar to those
offered to non-related third parties.
In accordance with the Bank Act (Canada), the aggregate of loans granted to
key officers of the Bank, excluding mortgage loans granted on their principal
residence, cannot exceed twice the officer's annual salary.
Loans to eligible key officers are granted under the same conditions as those
granted to any other employee of the Bank. The main conditions are as follows:
· the employee must meet the same credit requirements as a client;
· mortgage loans are offered at the preferential employee rate;
· home equity lines of credit bear interest at Canadian prime less
0.5%, but never lower than Canadian prime divided by two;
· personal loans bear interest at a risk-based regular client rate;
· credit card advances bear interest at a prescribed fixed rate in
accordance with Bank policy;
· personal lines of credit bear interest at Canadian prime less 0.5%,
but never lower than Canadian prime divided by two.
The Bank also offers a deferred stock unit plan to directors who are not Bank
employees. For additional information, see Note 24 to the Consolidated
Financial Statements. Additional information about related parties is
presented in Notes 10, 29 and 30 to the Consolidated Financial Statements.
Income Taxes
Notice of Assessment
In April 2024, the Bank was reassessed by the Canada Revenue Agency (CRA) for
additional income tax and interest of approximately $110 million (including
estimated provincial tax and interest) in respect of certain Canadian
dividends received by the Bank during the 2019 taxation year.
In prior fiscal years, the Bank had been reassessed for additional income tax
and interest of approximately $965 million (including provincial tax and
interest) in respect of certain Canadian dividends received by the Bank during
the 2012-2018 taxation years.
In the reassessments, the CRA alleges that the dividends were received as part
of a "dividend rental arrangement".
In October 2023, the Bank filed a notice of appeal with the Tax Court of
Canada, and the matter is now in litigation. The CRA may issue reassessments
to the Bank for taxation years subsequent to 2019 in regard to certain
activities similar to those that were the subject of the above-mentioned
reassessments. The Bank remains confident that its tax position was
appropriate and intends to vigorously defend its position. As a result, no
amount has been recognized in the Consolidated Financial Statements as at
October 31, 2024.
Canadian Government's 2022 Tax Measures
On November 4, 2022, the Government of Canada introduced Bill C-32 - An Act
to implement certain provisions of the fall economic statement tabled in
Parliament on November 3, 2022 and certain provisions of the budget tabled in
Parliament on April 7, 2022 to implement tax measures applicable to certain
entities of banking and life insurer groups, as presented in its April 7,
2022 budget. These tax measures included the Canada Recovery Dividend (CRD),
which is a one-time, 15% tax on the fiscal 2021 and 2020 average taxable
income above $1 billion, as well as a 1.5% increase in the statutory tax
rate. On December 15, 2022, Bill C-32 received royal assent. Given that these
tax measures had been enacted as at January 31, 2023, a $32 million tax
expense for the CRD and an $8 million tax recovery for the tax rate increase,
including the impact related to current and deferred taxes for fiscal 2022,
were recognized in the Consolidated Financial Statements during the year ended
October 31, 2023.
Other Tax Measures
On November 30, 2023, the Government of Canada introduced Bill C-59 - An Act
to implement certain provisions of the fall economic statement tabled in
Parliament on November 21, 2023 and certain provisions of the budget tabled in
Parliament on March 28, 2023 to implement tax measures applicable to the Bank.
The measures include the denial of the deduction in respect of dividends
received after 2023 on shares that are mark-to-market property for tax
purposes (except for dividends received on "taxable preferred shares" as
defined in the Income Tax Act), as well as the application of a 2% tax on the
net value of equity repurchases occurring as of January 1, 2024. On June 20,
2024, Bill C-59 received royal assent and these tax measures were enacted at
the reporting date. The Consolidated Financial Statements reflect the denial
of the deduction in respect of the dividends covered by Bill C-59 since
January 1, 2024.
On May 2, 2024, the Government of Canada introduced Bill C-69 - An Act to
implement certain provisions of the budget tabled in Parliament on April 16,
2024. The bill includes the Pillar 2 rules (global minimum tax) published by
the Organisation for Economic Co-operation and Development (OECD) that will
apply to fiscal years beginning on or after December 31, 2023 (November 1,
2024 for the Bank). On June 20, 2024, Bill C-69 received royal assent. To
date, the Pillar 2 rules have been included in a bill or enacted in certain
jurisdictions where the Bank operates. The Pillar 2 rules do not apply to this
fiscal year. The Bank is still assessing its income tax exposure arising from
these rules but estimates that the impact on its effective income tax rate
would be an increase of approximately 1% to 2%. During the years ended October
31, 2024 and 2023, the Bank applied the exception to the recognition and
disclosure of information of deferred tax assets and liabilities arising from
the Pillar 2 rules in the jurisdictions where they have been included in a
bill or enacted.
Securitization and Off-Balance-Sheet Arrangements
In the normal course of business, the Bank is party to various financial
arrangements that, under IFRS Accounting Standards, are not required to be
recorded on the Consolidated Balance Sheet or are recorded under amounts other
than their notional or contractual values. These arrangements include, among
others, transactions with structured entities, derivative financial
instruments, the issuance of guarantees, credit instruments, and financial
assets received as collateral.
Structured Entities
The Bank uses structured entities, among other means, to diversify its funding
sources and to offer services to clients, in particular to help them
securitize their financial assets or provide them with investment
opportunities. Under IFRS Accounting Standards, a structured entity must be
consolidated if the Bank controls the entity. Note 1 to the Consolidated
Financial Statements describes the accounting policy and criteria used for
consolidating structured entities. Additional information on consolidated and
non-consolidated structured entities is provided in Note 29 to the
Consolidated Financial Statements.
Securitization of the Bank's Financial Assets
Mortgage Loans
The Bank participates in two Canada Mortgage and Housing Corporation (CMHC)
securitization programs: the Mortgage-Backed Securities (MBS) Program under
the National Housing Act (Canada) (NHA) and the Canada Mortgage Bond (CMB)
Program. Under the first program, the Bank issues NHA securities backed by
insured residential mortgage loans and, under the second, the Bank sells NHA
securities to Canada Housing Trust (CHT), which finances the purchase through
the issuance of mortgage bonds insured by CMHC. Moreover, these mortgage bonds
feature an interest rate swap agreement under which a CMHC-certified
counterparty pays CHT the interest due to investors and receives the interest
on the NHA securities. As at October 31, 2024, the outstanding amount of NHA
securities issued by the Bank and sold to CHT was $24.0 billion. The mortgage
loans sold consist of fixed- or variable-rate residential loans that are
insured against potential losses by a loan insurer. In accordance with the
NHA-MBS Program, the Bank advances the funds required to cover late payments
and, if necessary, obtains reimbursement from the insurer that insured the
loan. The NHA-MBS and CMB programs do not use liquidity guarantee
arrangements. The Bank uses these securitization programs mainly to diversify
its funding sources. In accordance with IFRS Accounting Standards, because the
Bank retains substantially all of the risks and rewards of ownership of the
mortgage loans transferred to CHT, the derecognition criteria are not met.
Therefore, the insured mortgage loans securitized under the CMB Program
continue to be recognized in Loans in the Bank's Consolidated Balance Sheet,
and the liabilities for the considerations received from the transfer are
recognized in Liabilities related to transferred receivables in the
Consolidated Balance Sheet. For additional information, see Note 9 to the
Consolidated Financial Statements.
Credit Card Receivables
In April 2015, the Bank set up Canadian Credit Card Trust II (CCCT II) to
continue its program of securitizing credit card receivables on a revolving
basis. The Bank uses this entity for capital management and funding purposes.
The Bank acts as the servicer of the receivables sold and maintains the client
relationship. Furthermore, it administers the securitization program and
ensures that all related procedures are stringently followed and that
investors are paid according to the provisions of the program.
As at October 31, 2024, the credit card receivables portfolio held by CCCT II
represented an amount outstanding of $2.4 billion. CCCT II issued notes to
investors, $0.1 billion of which is held by third parties and $0.8 billion is
held by the Bank. CCCT II also issued a bank certificate held by the Bank that
stood at $2.4 billion as at October 31, 2024. New receivables are periodically
sold to the structure on a revolving basis to replace the receivables
reimbursed by clients.
Every series of notes is rated by the Fitch and DBRS Morningstar (DBRS) rating
agencies. From this portfolio of sold receivables, the Bank retains the excess
spread, i.e., the residual net interest income after all the expenses related
to this structure have been paid, and thus provides first-loss protection.
Furthermore, second-loss protection for issued series is provided by notes
subordinated to the senior notes, representing 5.8% of the total amount of the
series issued. The Bank controls CCCT II and thus consolidates it.
Securitization of Third-Party Financial Assets
The Bank administers multi-seller conduits that purchase financial assets from
clients and finance those purchases by issuing commercial paper backed by the
acquired assets. Clients use these multi-seller conduits to diversify their
funding sources and reduce borrowing costs while continuing to service the
financial assets and providing some amount of first-loss protection. Notes
issued by the conduits and held by third parties provide additional credit
loss protection. The Bank acts as a financial agent and provides
administrative and transaction structuring services to these conduits. The
Bank provides backstop liquidity and credit enhancement facilities under the
commercial paper program. These facilities are presented and described in
Notes 28 and 29 to the Consolidated Financial Statements. The Bank has entered
into derivative financial instrument contracts with these conduits, the fair
value of which is presented on the Bank's Consolidated Balance Sheet. The Bank
is not required to consolidate these conduits, as it does not control them.
Derivative Financial Instruments
The Bank uses various types of derivative financial instruments to meet its
clients' needs, generate trading activity revenues, and manage its exposure to
interest rate, foreign exchange, and credit risk as well as other market
risks. All derivative financial instruments are accounted for at fair value in
the Consolidated Balance Sheet. Transactions in derivative financial
instruments are expressed as notional amounts. These amounts are not presented
as assets or liabilities in the Consolidated Balance Sheet. They represent the
face amount of the contract to which a rate or price is applied to determine
the amount of cash flows to be exchanged. Notes 1 and 18 to the Consolidated
Financial Statements provide additional information on the types of derivative
financial instruments used by the Bank and their accounting basis.
Guarantees
In the normal course of business, the Bank enters into various guarantee
contracts. The principal types of guarantees are letters of guarantee,
backstop liquidity and credit enhancement facilities, certain securities
lending activities, and certain indemnification agreements. Note 28 to the
Consolidated Financial Statements provides detailed information on these
guarantees.
Credit Instruments
In the normal course of business, the Bank enters into various
off-balance-sheet credit commitments. The credit instruments used to meet the
financing needs of its clients represent the maximum amount of additional
credit that the Bank could be required to extend if the commitments were fully
drawn. Note 28 to the Consolidated Financial Statements provides detailed
information on these off-balance-sheet credit instruments and other items.
Financial Assets Received as Collateral
In the normal course of business, the Bank receives financial assets as
collateral as a result of transactions involving securities purchased under
reverse repurchase agreements, securities borrowing and lending agreements,
and derivative financial instrument transactions. For additional information
on financial assets received as collateral, see Note 28 to the Consolidated
Financial Statements.
Capital Management
Capital management has a dual role of ensuring a competitive return to the
Bank's shareholders while maintaining a solid capital foundation that covers
the risks inherent to the Bank's business activities, supports its business
segments, and protects its clients.
Capital Management Framework
The Bank's capital management policy defines the guiding principles as well as
the roles and responsibilities of its internal capital adequacy assessment
process. This process aims to determine the capital level that the Bank must
maintain to pursue its business activities and accommodate unexpected losses
arising from extremely adverse economic and operational conditions. The Bank
has implemented a rigorous internal capital adequacy assessment process that
comprises the following procedures:
· conducting an overall risk assessment;
· measuring significant risks and the capital requirements related
to the Bank's financial budget for the next fiscal year and current and
prospective risk profiles;
· integrating stress tests across the organization and executing
sensitivity analyses to determine the capital buffer above minimum regulatory
levels (for additional information on enterprise-wide stress testing, see the
Risk Management section of this MD&A);
· aggregating capital and monitoring the reasonableness of internal
capital compared with regulatory capital;
· comparing projected internal capital against regulatory capital
levels, internal operating targets, and competing banks;
· attesting to the adequacy of the Bank's capital levels.
Assessing capital adequacy is an integral part of capital planning and
strategy. The Bank sets internal operating targets that include a
discretionary cushion in excess of the minimum regulatory requirements, which
provides a solid financial structure and sufficient capital to meet
management's business needs in accordance with its risk appetite, along with
competitive returns to shareholders, under both normal market conditions and a
range of severe but plausible stress testing scenarios. The internal capital
adequacy assessment process is a key tool in establishing the Bank's capital
strategy and is subject to quarterly reviews and periodic amendments.
Risk-adjusted return on capital and shareholder value added (SVA), which are
obtained from an assessment of required capital, are calculated periodically
for each of the Bank's business segments. The results are then used to guide
management in allocating capital among the various business segments.
Structure and Governance
Along with its partners from Risk Management, the Global Funding and Treasury
Group, and Finance, the Capital Management team is responsible for maintaining
integrated control methods and processes so that an overall assessment of
capital adequacy may be performed.
The Board oversees the structure and development of the Bank's capital
management policy and ensures that the Bank maintains sufficient capital in
accordance with regulatory requirements and in consideration of market
conditions. The Board delegates certain responsibilities to the Risk
Management Committee (RMC), which in turn recommends capital management
policies and oversees application thereof. The Board, on the recommendation of
the RMC, assumes the following responsibilities:
· reviewing and approving the capital management policy;
· reviewing and approving the Bank's risk appetite, including the
main capital and risk targets and the corresponding limits;
· reviewing and approving the capital plan and strategy on an
annual basis, including the Bank's internal capital adequacy assessment
process;
· reviewing and approving the implementation of significant
measures respecting capital, including contingency measures;
· reviewing significant capital disclosures, including Basel
capital adequacy ratios;
· ensuring the appropriateness of the regulatory capital adequacy
assessment.
The Senior Leadership Team is responsible for defining the Bank's strategy and
plays a key role in guiding capital-related measures and decisions. The
Enterprise Wide Risk Management Committee oversees capital management, which
consists of reviewing the capital plan and strategy and implementing
significant capital-related measures, including contingency measures, and
making recommendations about these measures.
Basel Accord and Regulatory Environment
Basel Accord
The Basel Accord proposes a range of approaches of varying complexity, the
choice of which determines the sensitivity of capital to risks. A less complex
approach, such as the Standardized Approach, uses regulatory weightings, while
a more complex approach uses the Bank's internal estimates of risk components
to establish risk-weighted assets (RWA) and calculate regulatory capital.
As required under Basel, risk-weighted assets are calculated for each credit
risk, market risk, and operational risk. Some of OSFI's revision to its
capital, leverage, liquidity, and disclosure rules, made as part of the Basel
III reforms, took effect during the second quarter of 2023, notably the
implementation of the revised Standardized Approach and IRB Approach to credit
risk, the revision of the operational framework of the leverage ratio
framework, and the introduction of a more risk-sensitive capital floor. The
Bank uses the Internal Ratings-Based (IRB) Approaches for credit risk to
determine minimum regulatory capital requirements for most of its portfolios.
The Bank must use the Foundation Internal Ratings-Based (FIRB) Approach for
certain specific exposure types such as large corporates and financial
institutions. For all other exposure types treated under an IRB Approach, the
Bank uses the Advanced Internal Ratings-Based (AIRB) Approach. Under the FIRB
Approach, the Bank can use its own estimate of probability of default (PD) but
must also rely on OSFI estimates for loss given default (LGD) and exposure at
default (EAD) risk parameters. Under the AIRB Approach, the Bank can use its
own estimates for all risk parameters: PD, LGD, EAD. Under both IRB
Approaches, the risk parameters are subject to specific input floors. The
credit risk of certain portfolios considered to be less significant is
weighted according to the revised Standardized Approach, which uses prescribed
regulatory weightings. Exposure to banking book equity securities is also
weighted according to the revised Standardized Approach.
With respect to the risk related to securitization operations, the capital
treatment depends on the type of underlying exposures and on the information
available about the exposures. The Bank must use the Securitization: Internal
Ratings-Based Approach (SEC-IRBA) if it is able to apply an approved internal
ratings-based model and has sufficient information to calculate the capital
requirements for all underlying exposures in the securitization pool. Under
this approach, RWA is derived from a combination of supervisory inputs and
inputs specific to the securitization exposure, such as the implicit capital
charge related to the underlying exposures, the credit enhancement level, the
effective maturity, the number of exposures, and the weighted average LGD.
If the Bank cannot use the SEC-IRBA, it must use the Securitization: External
Ratings-Based Approach (SEC-ERBA) for the securitization exposures that are
externally rated. This approach assigns risk weights to exposures using
external ratings. The Bank uses the ratings assigned by Moody's, Standard
& Poor's (S&P), Fitch, Kroll Bond Rating Agency, or DBRS or a
combination of these ratings. The Bank uses the Securitization: Internal
Assessment Approach (SEC-IAA) for unrated securitization exposures relating to
the asset-backed commercial paper conduits it sponsors. The SEC-IAA rating
methodologies used are mainly based on criteria published by the
above-mentioned credit rating agencies and consider risk factors that the Bank
deems relevant to assessing the credit quality of the exposures. The Bank's
SEC-IAA includes an assessment of the extent by which the credit enhancement
available for loss protection provides coverage of expected losses. The levels
of stressed coverage the Bank requires for each internal risk rating are
consistent with the requirements published by the rating agencies for
equivalent external ratings by asset class. If the Bank cannot apply the
SEC-ERBA or the SEC-IAA, it must use the supervisory formula under the
Securitization Standardized Approach (SEC-SA). Under this approach, RWA is
derived from inputs specific to the securitization exposure, such as the
implicit capital charge related to the underlying exposures calculated under
the standardized credit risk approach as well as credit enhancement and
delinquency levels.
If none of the above approaches can be used, the securitization exposure must
be assigned a risk weight of 1,250%. The Bank can apply a reduced capital
charge for securitization exposures that meet the criteria of the Simple,
Transparent and Comparable (STC) framework.
For operational risk, the Bank applies the revised Standardized Approach,
which incorporates the Bank's internal operational risk loss experience in the
RWA calculation.
In the first quarter of 2024, the Bank implemented OSFI's finalized guidance
of the revised market risk framework, consistent with the BCBS's Fundamental
Review of the Trading Book (FRTB) as well as the revised credit valuation
adjustment (CVA) risk framework. For both market risk and CVA, the Bank uses
the sensitivities-based Standardized Approach (SA) for computing RWA. The
implementation of these revised frameworks on November 1, 2023 had a negative
impact of 38 bps on the Bank's CET1 capital ratio.
The Bank must also meet the requirements of the capital output floor that will
ensure that its total calculated RWA is not below 72.5% of the total RWA as
calculated under the Basel III Standardized Approaches. Initially, OSFI was
allowing a phase-in of the floor factor over three years, starting at 65.0% in
the second quarter of 2023 and rising 2.5% per year to reach 72.5% in fiscal
2026. On July 5, 2024, OSFI announced a one-year delay to the increase in the
capital output floor. Therefore, the revised floor factor will reach 72.5% in
fiscal 2027. For fiscal 2024, the floor factor is set at 67.5%; it will remain
at this level until the end of fiscal 2025 and then increase until 2027. If
the capital requirement is less than the capital output floor requirement
after applying the floor factor, the difference is added to total RWA.
Capital ratios are calculated by dividing capital by RWA. Credit, market, and
operational risks are factored into the RWA calculation for regulatory
purposes. Basel rules apply at the consolidated level of the Bank. The assets
of non-consolidated entities for regulatory purposes are therefore excluded
from the RWA calculation.
The definition adopted by BCBS distinguishes between three types of capital.
Common Equity Tier 1 (CET1) capital consists of common shareholders' equity
less goodwill, intangible assets, and other CET1 capital deductions.
Additional Tier 1 (AT1) capital consists of eligible non-cumulative preferred
shares, limited recourse capital notes (LRCN), and other AT1 capital
adjustments. The sum of CET1 and AT1 capital forms what is known as Tier 1
capital. Tier 2 capital consists of eligible subordinated debts and certain
allowances for credit losses. Total regulatory capital is the sum of Tier 1
and Tier 2 capital.
OSFI is responsible for applying the Basel Accord in Canada. As required under
the Basel Accord, OSFI requires that recognized regulatory capital instruments
other than common equity must have a non-viability contingent capital (NVCC)
clause to ensure that investors bear losses before taxpayers should the
government determine that it is in the public interest to rescue a non-viable
financial institution. As at October 31, 2024, all of the Bank's regulatory
capital instruments, other than common shares, have an NVCC clause.
Furthermore, in the regulations of the Canada Deposit Insurance Corporation
(CDIC) Act and the Bank Act (Canada), the Government of Canada has provided
detailed information on conversion, issuance, and compensation regimes for
bail-in instruments issued by Domestic Systemically Important Banks (D-SIBs)
(collectively the Bail-In Regulations). Pursuant to the CDIC Act, in
circumstances where OSFI has determined that the Bank has ceased, or is about
to cease, to be viable, the Governor in Council may, upon a Minister of
Finance recommendation indicating that he or she believes that it is in the
public interest to do so, grant an order directing CDIC to convert all or a
portion of certain shares and liabilities of the Bank into common shares (a
"Bail-In Conversion").
The Bail-In Regulations governing the conversion and issuance of bail-in
instruments came into force on September 23, 2018, and those governing
compensation for holders of converted instruments came into force on March 27,
2018. Any shares and liabilities issued before the effective date of the
Bail-In Regulations are not subject to a Bail-In Conversion, unless, in the
case of a liability, the terms of said liability are, on or after that day,
amended to increase its principal amount or to extend its term to maturity,
and the liability, as amended, meets the requirements to be subject to a
Bail-In Conversion.
The Bail-In Regulations prescribe the types of shares and liabilities that are
subject to a Bail-In Conversion. In general, any senior debt securities with
an initial or amended term-to-maturity greater than 400 days that are
unsecured or partially secured and have been assigned a Committee on Uniform
Securities Identification Procedures (CUSIP), an International Securities
Identification Number (ISIN), or similar identification number are subject to
a Bail-In Conversion. However, certain other debt obligations of the Bank,
such as structured notes (as defined in the Bail-In Regulations), covered
bonds, deposits, and certain derivative financial instruments, are not subject
to a Bail-In Conversion.
The Bank and all other major Canadian banks must maintain the following
minimum capital ratios established by OSFI: a CET1 capital ratio of at least
11.5%, a Tier 1 capital ratio of at least 13.0%, and a Total capital ratio of
at least 15.0%. All of these ratios are to include a capital conservation
buffer of 2.5% established by the BCBS and OSFI, a 1.0% surcharge applicable
solely to D-SIBs, and a 3.5% domestic stability buffer (DSB) established by
OSFI. The DSB, which can vary from 0% to 4.0% of RWA, consists exclusively of
CET1 capital. A D-SIB that fails to meet this buffer requirement is not
subject to automatic constraints to reduce capital distributions but must
provide a remediation plan to OSFI. Additionally, OSFI requires D-SIBs to
meet a Basel III leverage ratio of at least 3.5%, which includes a Tier 1
capital buffer of 0.5% applicable only to D-SIBs. The leverage ratio is a
measure independent of risk that is calculated by dividing the amount of Tier
1 capital by total exposure. Total exposure is defined as the sum of
on-balance-sheet assets (including derivative financial instrument exposures
and securities financing transaction exposures) and off balance-sheet items.
The assets deducted from Tier 1 capital are also deducted from total exposure.
OSFI's Total Loss Absorbing Capacity (TLAC) Guideline, which applies to all
D-SIBs under the federal government's Bail-In Regulations, is intended to
ensure that a D-SIB has sufficient loss-absorbing capacity to support its
internal recapitalization in the unlikely event it becomes non-viable.
Available TLAC includes total capital as well as certain senior unsecured
debts that satisfy all of the eligibility criteria of OSFI's TLAC guideline.
OSFI requires D-SIBs to maintain a risk-based TLAC ratio of at least 25.0%
(including the DSB) of RWA and a TLAC leverage ratio of at least 7.25%. The
TLAC ratio is calculated by dividing available TLAC by RWA, and the TLAC
leverage ratio is calculated by dividing available TLAC by total exposure. As
at October 31, 2024, outstanding liabilities of $23.5 billion ($17.7 billion
as at October 31, 2023) were subject to conversion under the Bail-In
Regulations.
On September 12, 2023, OSFI released the final Parental Stand-Alone (Solo)
TLAC Framework for Domestic Systemically Important Banks Guideline. This
guideline focuses on the loss-absorbing capacity of Canadian parent banks
rather than its consolidated operations, allowing OSFI to assess the
stand-alone financial strength of the parent bank and its ability to act as a
source of financial strength for its subsidiaries and branches. The framework
complements OSFI's existing TLAC guideline for D-SIBs on a group consolidated
basis, providing an additional layer of protection to safeguard the rights and
interests of depositors, policyholders, and creditors. D-SIBs have had to
adhere to this guideline as of first-quarter 2024, and the Bank is compliant
therewith.
Requirements - Regulatory Capital((1)), Leverage((1)), and TLAC((2)) Ratios
Requirements as at October 31, 2024 Ratios as at October 31, 2024
Minimum Capital Minimum D-SIB surcharge Minimum Domestic Minimum set
conservation set by set by stability by OSFI, including
buffer BCBS OSFI buffer((3)) the domestic
stability buffer
Capital ratios
CET1 4.5 % 2.5 % 7.0 % 1.0 % 8.0 % 3.5 % 11.5 % 13.7 %
Tier 1 6.0 % 2.5 % 8.5 % 1.0 % 9.5 % 3.5 % 13.0 % 15.9 %
Total 8.0 % 2.5 % 10.5 % 1.0 % 11.5 % 3.5 % 15.0 % 17.0 %
Leverage ratio 3.0 % n.a. 3.0 % 0.5 % 3.5 % n.a. 3.5 % 4.4 %
TLAC ratio 21.5 % n.a. 21.5 % n.a. 21.5 % 3.5 % 25.0 % 31.2 %
TLAC leverage ratio 6.75 % n.a. 6.75 % 0.5 % 7.25 % n.a. 7.25 % 8.6 %
n.a. Not applicable
(1) The capital ratios and the leverage ratio are calculated in
accordance with the Basel III rules, as set out in OSFI's Capital Adequacy
Requirements Guideline and Leverage Requirements Guideline.
(2) The TLAC ratio and the TLAC leverage ratio are calculated in
accordance with OSFI's Total Loss Absorbing Capacity Guideline.
(3) On June 18, 2024, OSFI confirmed that the domestic stability buffer
was being maintained at 3.5%.
The Bank ensures that its capital levels are always above the minimum capital
requirements set by OSFI, including the DSB. By maintaining a strong capital
structure, the Bank can cover the risks inherent to its business activities,
support its business segments, and protect its clients.
Other disclosure requirements pursuant to Pillar 3 of the Basel Accord and a
set of recommendations defined by the EDTF are presented in the Supplementary
Regulatory Capital and Pillar 3 Disclosure report published quarterly and
available on the Bank's website at nbc.ca. Furthermore, a complete list of
capital instruments and their main features is also available on the Bank's
website.
Regulatory Context
The Bank closely monitors regulatory developments and participates actively in
various consultative processes. During the first quarter of 2024, the Bank
implemented the revised market risk and CVA frameworks. Since November 1,
2023, there have been no other new regulatory developments to be considered,
except for the one-year postponement of the increase to the capital output
floor, as previously mentioned.
Capital Management in 2024
Management Activities
On December 12, 2023, the Bank began a normal course issuer bid to repurchase
for cancellation up to 7,000,000 common shares (representing approximately
2.1% of its then outstanding common shares) over the 12-month period ending no
later than December 11, 2024. During the year ended October 31, 2024, the Bank
did not repurchase any common shares.
On February 5, 2024, the Bank issued medium-term notes for a total amount
of $500 million bearing interest at 5.279% and maturing on
February 15, 2034. Given that the medium-term notes satisfy the NVCC
requirements, they qualify for the purposes of calculating regulatory capital
under the Basel III rules.
As at October 31, 2024, the Bank had 340,743,876 issued and outstanding
common shares compared to 338,284,629 a year earlier. It also had 66,000,000
issued and outstanding preferred shares (excluding Series 44, Series 45 and
Series 46 preferred shares issued by the Bank in conjunction with the LRCN,
for additional information, see Note 20 to the Consolidated Financial
Statements) and 1,500,000 LRCN, unchanged from October 31, 2023. For
additional information on capital instruments, see Notes 16, 17 and 20 to the
Consolidated Financial Statements.
Dividends
The Bank's strategy for common share dividends is to aim for a dividend payout
ratio between 40% and 50% of net income attributable to common shareholders,
taking into account such factors as financial position, cash needs, regulatory
requirements, and any other factor deemed relevant by the Board.
For fiscal 2024, the Bank declared $1,468 million in dividends to common
shareholders, representing 40.1% of net income attributable to common
shareholders (2023: 42.7%) and representing 41.2% of adjusted net income
attributable to common shareholders (2023: 41.7%). The declared dividends are
within the target payout range as a result of the dividend increase during the
fiscal year. Given the economic conditions during fiscal 2024, the Bank has
taken a prudent approach to managing regulatory capital and remains confident
in its ability to increase earnings going forward.
Shares, Other Equity Instruments, and Stock Options
As at October 31, 2024
Number of shares or LRCN $ million
First preferred shares
Series 30 14,000,000 350
Series 32 12,000,000 300
Series 38 16,000,000 400
Series 40 12,000,000 300
Series 42 12,000,000 300
66,000,000 1,650
Other equity instruments
LRCN - Series 1 500,000 500
LRCN - Series 2 500,000 500
LRCN - Series 3 500,000 500
1,500,000 1,500
67,500,000 3,150
Common shares 340,743,876 3,463
Stock options 10,443,059
As at November 29, 2024, there were 340,560,156 common shares and 10,438,408
stock options outstanding. NVCC provisions require the conversion of capital
instruments into a variable number of common shares should OSFI deem a bank to
be non-viable or should the government publicly announce that a bank has
accepted or agreed to accept a capital injection. If an NVCC trigger event
were to occur, all of the Bank's preferred shares, LRCNs, and medium-term
notes maturing on August 16, 2032, and February 15, 2034, which are NVCC
capital instruments, would be converted into common shares of the Bank
according to an automatic conversion formula at a conversion price
corresponding to the greater of the following amounts: (i) a $5.00 contractual
floor price; or (ii) the market price of the Bank's common shares on the date
of the trigger event (10-day weighted average price). Based on a $5.00 floor
price and including an estimate for accrued dividends and interest, these NVCC
capital instruments would be converted into a maximum of 1,021 million Bank
common shares, which would have a 75.0% dilutive effect based on the number of
Bank common shares outstanding as at October 31, 2024.
Regulatory Capital Ratios, Leverage Ratio, and TLAC Ratios
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 RWA and
by the impact of implementing OSFI's revised market risk framework. The Tier 1
capital ratio was more negatively affected by the RWA growth and is down
compared to October 31, 2023. The increase of the Total capital ratio is
explained by the $500 million issuance of medium-term notes during fiscal
2024.
As at October 31, 2024, the leverage ratio was 4.4%, stable compared to
October 31, 2023, as growth in total exposure was offset by growth in Tier 1
capital.
As at October 31, 2024, the Bank's TLAC ratio and TLAC leverage ratio were,
respectively, 31.2% and 8.6%, compared with 29.2% and 8.0%, respectively, as
at October 31, 2023. The increases in both the TLAC and TLAC leverage ratios
are primarily explained by the net issuance of instruments that met the TLAC
eligibility criteria during the fiscal year.
During the year ended October 31, 2024, the Bank was in compliance with all
of OSFI's regulatory capital, leverage, and TLAC requirements.
Regulatory Capital((1)), Leverage Ratio((1)), and TLAC((2))
As at October 31
(millions of Canadian dollars) 2024 2023
Capital
CET1 19,321 16,920
Tier 1 22,470 20,068
Total 24,001 21,056
Risk-weighted assets 140,975 125,592
Total exposure 511,160 456,478
Capital ratios
CET1 13.7 % 13.5 %
Tier 1 15.9 % 16.0 %
Total 17.0 % 16.8 %
Leverage ratio 4.4 % 4.4 %
Available TLAC 44,040 36,732
TLAC ratio 31.2 % 29.2 %
TLAC leverage ratio 8.6 % 8.0 %
(1) Capital, risk-weighted assets, total exposure, the capital ratios,
and the leverage ratio are calculated in accordance with the Basel III rules,
as set out in OSFI's Capital Adequacy Requirements Guideline and Leverage
Requirements Guideline.
(2) Available TLAC, the TLAC ratio, and the TLAC leverage ratio are
calculated in accordance with OSFI's Total Loss Absorbing Capacity Guideline.
Movement in Regulatory Capital((1))
Year ended October 31
(millions of Canadian dollars) 2024 2023
Common Equity Tier 1 (CET1) capital
Balance at beginning 16,920 14,818
Issuance of common shares (including Stock Option Plan) 130 85
Impact of shares purchased or sold for trading 23 3
Repurchase of common shares − −
Other contributed surplus 33 22
Dividends on preferred and common shares and distributions on other equity (1,643) (1,507)
instruments
Net income attributable to the Bank's shareholders and holders of other equity 3,817 3,337
instruments
Removal of own credit spread net of income taxes 400 232
Impact of adopting IFRS 17((2)) (94) −
Other (191) (226)
Movements in accumulated other comprehensive income
Translation adjustments 13 103
Debt securities at fair value through other comprehensive income 9 (1)
Other − 1
Change in goodwill and intangible assets (net of related tax liability) 38 37
Other, including regulatory adjustments
Change in defined benefit pension plan asset (net of related tax liability) (92) 101
Change in amount exceeding 15% threshold
Deferred tax assets − −
Significant investment in common shares of financial institutions − −
Deferred tax assets, unless they result from temporary differences (net of (15) (25)
related tax liability)
Other deductions of regulatory adjustments to CET1 implemented by OSFI (1) (60)
Change in other regulatory adjustments (26) −
Balance at end 19,321 16,920
Additional Tier 1 capital
Balance at beginning 3,148 3,143
New Tier 1 eligible capital issuances − −
Redeemed capital − −
Other, including regulatory adjustments 1 5
Balance at end 3,149 3,148
Total Tier 1 capital 22,470 20,068
Tier 2 capital
Balance at beginning 988 1,766
New Tier 2 eligible capital issuances 500 −
Redeemed capital − (750)
Tier 2 instruments issued by subsidiaries and held by third parties − −
Change in certain allowances for credit losses 4 (54)
Other, including regulatory adjustments 39 26
Balance at end 1,531 988
Total regulatory capital 24,001 21,056
(1) See the Financial Reporting Method section on pages 14 to 20 for
additional information on capital management measures.
(2) Fiscal 2023 figures have not been adjusted to reflect accounting
policy changes arising from the adoption of IFRS17. For additional
information, see Note 2 to the Consolidated Financial Statements.
RWA by Key Risk Drivers
Risk-weighted assets (RWA) amounted to $141.0 billion as at October 31, 2024
compared to $125.6 billion as at October 31, 2023, a $15.4 billion increase
resulting mainly from organic growth in RWA, a deterioration in the credit
quality of the loan portfolio, and methodology changes related mainly to the
implementation of the revised market risk framework. These factors were partly
offset by the positive impact from the implementation of the Basel III
reforms related to the credit risk framework. Changes in the Bank's RWA by
risk type are presented in the following table.
Risk-Weighted Assets Movement by Key Drivers((1))
Quarter ended
(millions of Canadian dollars) October 31, 2024 July 31, 2024 April 30, 2024 January 31, 2024 October 31, 2023
Total Total Total Total Total
Credit risk - Risk-weighted assets at beginning 116,684 112,663 108,838 107,145 102,087
Book size 1,067 3,484 2,484 5,020 2,288
Book quality (70) 649 508 435 1,045
Model updates 439 (244) − (31) (107)
Methodology and policy − − − (2,629) −
Acquisitions and disposals − − − − −
Foreign exchange movements 330 132 833 (1,102) 1,832
Credit risk - Risk-weighted assets at end 118,450 116,684 112,663 108,838 107,145
Market risk - Risk-weighted assets at beginning 8,066 9,641 10,148 5,662 5,985
Movement in risk levels((2)) (64) (1,575) (507) (352) (323)
Model updates − − − − −
Methodology and policy − − − 4,838 −
Acquisitions and disposals − − − − −
Market risk - Risk-weighted assets at end 8,002 8,066 9,641 10,148 5,662
Operational risk - Risk-weighted assets at beginning 14,168 13,811 13,384 12,785 12,490
Movement in risk levels 355 357 427 599 295
Methodology and policy − − − − −
Acquisitions and disposals − − − − −
Operational risk - Risk-weighted assets at end 14,523 14,168 13,811 13,384 12,785
Risk-weighted assets at end 140,975 138,918 136,115 132,370 125,592
(1) See the Financial Reporting Method section on pages 14 to 20 for
additional information on capital management measures.
(2) Also includes foreign exchange rate movements that are not
considered material.
The table above provides the RWA movements by the key drivers underlying the
different risk categories.
The Book size item reflects organic changes in book size and composition
(including new loans and maturing loans). RWA movements attributable to book
size include increases or decreases in exposures, measured by exposure at
default, assuming a stable risk profile.
The Book quality item is the Bank's best estimate of changes in book quality
related to experience such as underlying customer behaviour or demographics,
including changes resulting from model recalibrations or realignments and also
including risk mitigation factors.
The Model updates item is used to reflect implementations of new models,
changes in model scope, and any other change applied to address model
malfunctions.
The Methodology and policy item presents the impact of changes in calculation
methods resulting from changes in regulatory policies or from new regulations.
During the first quarter of 2024, the Bank refined the credit risk RWA
calculation related to derivatives and certain non-retail exposures, and it
also implemented OSFI's revised market risk and CVA risk frameworks.
Allocation of Economic Capital and Regulatory RWA
Economic capital is an internal measure that the Bank uses to determine the
capital it needs to remain solvent and to pursue its business operations.
Economic capital takes into consideration the credit, market, operational,
business, and other risks to which the Bank is exposed as well as the risk
diversification effect among them and among the business segments. Economic
capital thus helps the Bank to determine the capital required to protect
itself against such risks and ensure its long-term viability. The by-segment
allocation of economic capital and regulatory RWA was carried out on a
stand-alone basis before attribution of goodwill and intangible assets. The
method used to assess economic capital is reviewed regularly in order to
accurately quantify these risks.
The Risk Management section of this MD&A provides comprehensive
information about the main types of risk. The "Other risks" presented below
include risks such as business risk and structural interest rate risk in
addition to the benefit of diversification among types of risk.
Allocation of Risks by Business Segment
As at October 31, 2024
(millions of Canadian dollars)
Business
segments
Major activities
Economic capital by type of risk Credit 4,290 Credit 138 Credit 3,251 Credit 1,491 Credit 272
Market - Market - Market 228 Market - Market 183
Operational 395 Operational 181 Operational 518 Operational 39 Operational 29
Other risks 436 Other risks 609 Other risks 924 Other risks 125 Other risks (734)
Total 5,121 Total 928 Total 4,921 Total 1,655 Total (250)
Risk-weighted Credit 53,907 Credit 2,229 Credit 33,482 Credit 18,918 Credit 9,914
assets((1)) Market - Market - 2,264 Market 7,514 Market - Market 488
Operational 4,942 Operational Operational 6,475 Operational 482 Operational 360
Total 58,849 Total 4,493 Total 47,471 Total 19,400 Total 10,762
(1) See the Financial Reporting Method section on pages 14 to 20 for
additional information on capital management measures.
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