REG - Nat Bank of Canada - Q2 2025 Report to shareholders (Part 2)
28/05/2025 15:45
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RNS Number : 4578K National Bank of Canada 28 May 2025
Regulatory Announcement (Part 2)
Q2 2025 Results
National Bank of Canada (the "Bank") announces publication of its Second
Quarter 2025 Release. The Second Quarter Results have been uploaded to the
National Storage Mechanism and will shortly be available at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) and is available on
the Bank's website at
https://www.nbc.ca/about-us/investors/quarterly-results.html
(https://www.nbc.ca/about-us/investors/quarterly-results.html)
To view the full PDF of this Second Quarter 2025 Release, please click on the
following link:
http://www.rns-pdf.londonstockexchange.com/rns/4572K_1-2025-5-28.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/4572K_1-2025-5-28.pdf)
Report to Shareholders Second Quarter 2025
Interim Condensed Consolidated
Financial Statements
(unaudited)
Consolidated Balance Sheets 56
Consolidated Statements of Income 57
Consolidated Statements of Comprehensive Income 58
Consolidated Statements of Changes in Equity 60
Consolidated Statements of Cash Flows 61
Notes to the Interim Condensed Consolidated Financial Statements 62
Consolidated Balance Sheets
(unaudited) (millions of Canadian dollars)
As at April 30, 2025 As at October 31, 2024
Assets
Cash and deposits with financial institutions 31,422 31,549
Securities (Notes 3, 4 and 5)
At fair value through profit or loss 133,092 115,935
At fair value through other comprehensive income 20,101 14,622
At amortized cost 15,450 14,608
168,643 145,165
Securities purchased under reverse repurchase agreements
and securities borrowed 20,836 16,265
Loans (Note 6)
Residential mortgage 108,507 95,009
Personal 47,533 46,883
Credit card 2,835 2,761
Business and government 128,791 99,720
287,666 244,373
Allowances for credit losses (1,938) (1,341)
285,728 243,032
Other
Derivative financial instruments 13,649 12,309
Premises and equipment 2,127 1,868
Goodwill 3,081 1,522
Intangible assets 1,870 1,233
Other assets (Note 7) 8,838 9,283
29,565 26,215
536,194 462,226
Liabilities and equity
Deposits (Notes 4, 8 and 10) 387,974 333,545
Other
Obligations related to securities sold short 13,871 10,873
Obligations related to securities sold under repurchase agreements
and securities loaned 40,984 38,177
Derivative financial instruments 18,096 15,760
Liabilities related to transferred receivables (Note 4) 29,403 28,377
Other liabilities (Note 9) 10,139 8,686
112,493 101,873
Subordinated debt (Note 11) 2,822 1,258
Equity
Equity attributable to the Bank's shareholders and holders of
other equity instruments (Notes 12, 14 and 19)
Preferred shares and other equity instruments 3,114 3,150
Common shares 9,805 3,463
Contributed surplus 113 85
Retained earnings 19,813 18,633
Accumulated other comprehensive income 59 219
32,904 25,550
Non-controlling interests 1 −
32,905 25,550
536,194 462,226
The accompanying notes are an integral part of these unaudited interim
condensed consolidated financial statements.
Consolidated Statements of Income
(unaudited) (millions of Canadian dollars)
Quarter ended April 30 Six months ended April 30
2025 ( ) 2024 2025 2024
Interest income
Loans 4,096 3,823 7,992 7,516
Securities at fair value through profit or loss 548 429 1,081 881
Securities at fair value through other comprehensive income 187 123 355 238
Securities at amortized cost 143 109 281 232
Deposits with financial institutions 288 391 602 814
5,262 4,875 10,311 9,681
Interest expense
Deposits 3,181 3,256 6,368 6,430
Liabilities related to transferred receivables 198 188 393 360
Subordinated debt 34 16 53 27
Other 644 780 1,320 1,478
4,057 4,240 8,134 8,295
Net interest income((1)) 1,205 635 2,177 1,386
Non-interest income
Underwriting and advisory fees 112 115 208 203
Securities brokerage commissions 55 46 112 97
Mutual fund revenues 174 155 352 305
Investment management and trust service fees 342 282 662 550
Credit fees 83 133 165 281
Card revenues 53 51 103 101
Deposit and payment service charges 74 72 146 144
Trading revenues (losses) 1,388 1,125 2,569 2,126
Gains (losses) on non-trading securities, net 22 38 49 63
Insurance revenues, net 18 12 40 33
Foreign exchange revenues, other than trading 64 57 130 105
Share in the net income of associates and joint ventures 2 2 4 4
Other 58 27 116 62
2,445 2,115 4,656 4,074
Total revenues 3,650 2,750 6,833 5,460
Non-interest expenses
Compensation and employee benefits 1,196 909 2,233 1,813
Occupancy 87 94 184 181
Technology 342 255 627 514
Communications 18 14 34 27
Professional fees 120 66 213 132
Other 179 134 297 254
1,942 1,472 3,588 2,921
Income before provisions for credit losses and income taxes 1,708 1,278 3,245 2,539
Provisions for credit losses (Note 6) 545 138 799 258
Income before income taxes 1,163 1,140 2,446 2,281
Income taxes (Note 16) 267 234 553 453
Net income 896 906 1,893 1,828
Net income attributable to
Preferred shareholders and holders of other equity instruments 43 37 82 74
Common shareholders 853 870 1,811 1,755
Bank shareholders and holders of other equity instruments 896 907 1,893 1,829
Non-controlling interests − (1) − (1)
896 906 1,893 1,828
Earnings per share (dollars) (Note 17)
Basic 2.19 2.56 4.96 5.18
Diluted 2.17 2.54 4.91 5.13
Dividends per common share (dollars) (Note 12) 1.14 1.06 2.28 2.12
The accompanying notes are an integral part of these unaudited interim
condensed consolidated financial statements.
(1) Net interest income includes dividend income. For additional
information, see Note 1 to the audited annual consolidated financial
statements for the year ended October 31, 2024.
Consolidated Statements of Comprehensive Income
(unaudited) (millions of Canadian dollars)
Quarter ended April 30 Six months ended April 30
2025 2024 2025 2024
Net income 896 906 1,893 1,828
Other comprehensive income, net of income taxes
Items that may be subsequently reclassified to net income
Net foreign currency translation adjustments
Net unrealized foreign currency translation gains (losses) on investments (589) 203 (136) (40)
in foreign operations
Impact of hedging net foreign currency translation gains (losses) 277 (86) 73 (17)
(312) 117 (63) (57)
Net change in debt securities at fair value through other comprehensive income
Net unrealized gains (losses) on debt securities at fair value through other (14) (12) 8 33
comprehensive income
Net (gains) losses on debt securities at fair value through other
comprehensive
income reclassified to net income (17) (12) (35) (9)
(31) (24) (27) 24
Net change in cash flow hedges
Net gains (losses) on derivative financial instruments designated as cash flow (14) (25) (29) 4
hedges
Net (gains) losses on designated derivative financial instruments reclassified (19) (31) (41) (57)
to net income
(33) (56) (70) (53)
Items that will not be subsequently reclassified to net income
Remeasurements of pension plans and other post-employment benefit plans 94 (24) 98 (16)
Net gains (losses) on equity securities designated at fair value through (27) 9 (10) 31
other comprehensive income
Net fair value change attributable to the credit risk on financial liabilities
designated at fair value through profit or loss 109 (168) 127 (333)
176 (183) 215 (318)
Total other comprehensive income, net of income taxes (200) (146) 55 (404)
Comprehensive income 696 760 1,948 1,424
Comprehensive income attributable to
Bank shareholders and holders of other equity instruments 696 761 1,948 1,425
Non-controlling interests − (1) − (1)
696 760 1,948 1,424
The accompanying notes are an integral part of these unaudited interim
condensed consolidated financial statements.
Consolidated Statements of Comprehensive Income (cont.)
(unaudited) (millions of Canadian dollars)
Income Taxes - Other Comprehensive Income
The following table presents the income tax expense or recovery for each
component of other comprehensive income.
Quarter ended April 30 Six months ended April 30
2025 2024 2025 2024
Items that may be subsequently reclassified to net income
Net foreign currency translation adjustments
Net unrealized foreign currency translation gains (losses) on investments 18 (4) 3 2
in foreign operations
Impact of hedging net foreign currency translation gains (losses) 90 (25) 26 (8)
108 (29) 29 (6)
Net change in debt securities at fair value through other comprehensive income
Net unrealized gains (losses) on debt securities at fair value through other (4) (4) 5 13
comprehensive income
Net (gains) losses on debt securities at fair value through other
comprehensive income
reclassified to net income (7) (4) (14) (3)
(11) (8) (9) 10
Net change in cash flow hedges
Net gains (losses) on derivative financial instruments designated as cash flow (7) (10) (12) 1
hedges
Net (gains) losses on designated derivative financial instruments reclassified (7) (12) (16) (22)
to net income
(14) (22) (28) (21)
Items that will not be subsequently reclassified to net income
Remeasurements of pension plans and other post-employment benefit plans 37 (10) 38 (7)
Net gains (losses) on equity securities designated at fair value through (9) 3 (3) 13
other comprehensive income
Net fair value change attributable to the credit risk on financial liabilities
designated at fair value through profit or loss 42 (65) 49 (128)
70 (72) 84 (122)
153 (131) 76 (139)
The accompanying notes are an integral part of these unaudited interim
condensed consolidated financial statements.
Consolidated Statements of Changes in Equity
(unaudited) (millions of Canadian dollars)
Six months ended April 30
2025 2024
Preferred shares and other equity instruments at beginning (Notes 12 and 3,150 3,150
19)
Issuances of preferred shares, Series 47 and 49 (Note 19) 264 −
Redemption of preferred shares, Series 32, for cancellation (300) −
Preferred shares and other equity instruments at end 3,114 3,150
Common shares at beginning (Note 12) 3,463 3,294
Issuances of common shares pursuant to the Stock Option Plan 34 103
Issuances of common shares related to the CWB acquisition (Notes 10 and
19)
Exchange of common shares 5,290 −
Automatic exchange of subscription receipts 1,040 −
Impact of shares purchased or sold for trading (22) 16
Common shares at end 9,805 3,413
Contributed surplus at beginning 85 68
Stock option expense (Note 14) 11 9
Stock options exercised (4) (11)
Replacement options related to the CWB acquisition (Note 14) 29 −
Other (8) (2)
Contributed surplus at end 113 64
Retained earnings at beginning 18,633 16,650
Net income attributable to the Bank's shareholders and holders of other equity 1,893 1,829
instruments
Dividends on preferred shares and distributions on other equity (93) (85)
instruments (Note 12)
Dividends on common shares (Note 12) (837) (720)
Issuance expenses for shares, net of income taxes (11) −
Remeasurements of pension plans and other post-employment benefit plans 98 (16)
Net gains (losses) on equity securities designated at fair value through other (10) 31
comprehensive income
Net fair value change attributable to the credit risk on financial liabilities
designated at fair value through profit or loss 127 (333)
Impact of a financial liability resulting from put options written to (1) 1
non-controlling interests
Other 14 11
Retained earnings at end 19,813 17,368
Accumulated other comprehensive income at beginning 219 420
Net foreign currency translation adjustments (63) (57)
Net change in unrealized gains (losses) on debt securities at fair value (27) 24
through other comprehensive income
Net change in gains (losses) on instruments designated as cash flow hedges (70) (53)
Accumulated other comprehensive income at end 59 334
Equity attributable to the Bank's shareholders and holders of other equity 32,904 24,329
instruments
−
Non-controlling interests at beginning − 2
Net income attributable to non-controlling interests − (1)
Other 1 −
Non-controlling interests at end 1 1
Equity 32,905 24,330
Accumulated Other Comprehensive Income
As at April 30,2025 As at April 30, 2024
Accumulated other comprehensive income
Net foreign currency translation adjustments 257 250
Net unrealized gains (losses) on debt securities at fair value through other (53) (11)
comprehensive income
Net gains (losses) on instruments designated as cash flow hedges (147) 93
Share in the other comprehensive income of associates and joint ventures 2 2
59 334
The accompanying notes are an integral part of these unaudited interim
condensed consolidated financial statements.
Consolidated Statements of Cash Flows
(unaudited) (millions of Canadian dollars)
Six months ended April 30
2025 ( ) 2024
Cash flows from operating activities
Net income 1,893 1,828
Adjustments for
Provisions for credit losses 799 258
Amortization of premises and equipment, including right-of-use assets 138 112
Amortization of intangible assets 154 143
Deferred taxes (173) (22)
Losses (gains) on sales of non-trading securities, net (45) (63)
Share in the net income of associates and joint ventures (4) (4)
Stock option expense 11 9
Gain on the fair value remeasurement of an equity interest (Note 18) (4) −
Change in operating assets and liabilities
Securities at fair value through profit or loss (17,157) (6,186)
Securities purchased under reverse repurchase agreements and securities (4,571) (9,897)
borrowed
Loans and acceptances, net of securitization (4,652) (11,112)
Deposits 21,101 18,708
Obligations related to securities sold short 429 (2,780)
Obligations related to securities sold under repurchase agreements and 2,791 3,147
securities loaned
Derivative financial instruments, net 1,083 4,212
Securitization - Credit cards (49) −
Interest and dividends receivable and interest payable 342 194
Current tax assets and liabilities 23 24
Other items 649 (970)
2,758 (2,399)
Cash flows from financing activities
Redemption of preferred shares for cancellation (300) −
Issuances of common shares (including the impact of shares purchased for 8 108
trading)
Issuance of subordinated debt 1,000 500
Issuance expenses for shares (11) −
Repayments of lease liabilities (46) (63)
Dividends paid on shares and distributions on other equity instruments (933) (804)
(282) (259)
Cash flows from investing activities
Net change in investments in associates and joint ventures (2) 10
Acquisition (Note 19) 148 −
Purchases of non-trading securities (16,734) (7,716)
Maturities of non-trading securities 5,269 2,546
Sales of non-trading securities 9,333 2,900
Net change in premises and equipment, excluding right-of-use assets (115) (322)
Net change in intangible assets (111) (125)
(2,212) (2,707)
Impact of currency rate movements on cash and cash equivalents (391) (191)
Increase (decrease) in cash and cash equivalents (127) (5,556)
Cash and cash equivalents at beginning 31,549 35,234
Cash and cash equivalents at end((1)) 31,422 29,678
Supplementary information about cash flows from operating activities
Interest paid 7,827 8,065
Interest and dividends received 10,346 9,645
Income taxes paid 539 588
The accompanying notes are an integral part of these unaudited interim
condensed consolidated financial statements.
(1) This item represents the balance of Cash and deposits with
financial institutions in the Consolidated Balance Sheet. It includes an
amount of $14.7 billion as at April 30, 2025 ($11.7 billion as at
October 31, 2024) for which there are restrictions and of which $6.6 billion
($6.5 billion as at October 31, 2024) represents the balances that the Bank
must maintain with central banks, other regulatory agencies, and certain
counterparties.
Notes to the Interim Condensed Consolidated Financial Statements
(unaudited) (millions of Canadian dollars)
Note 1 Basis of Presentation 62 Note 11 Subordinated Debt 85
Note 2 Future Accounting Policy Changes 63 Note 12 Share Capital and Other Equity Instruments 86
Note 3 Fair Value of Financial Instruments 64 Note 13 Capital Disclosure 87
Note 4 Financial Instruments Designated at Fair Value Through Note 14 Share-Based Payments 88
Profit or Loss 69 Note 15 Employee Benefits - Pension Plans and Other
Note 5 Securities 70 Post-Employment Benefit Plans 89
Note 6 Loans and Allowances for Credit Losses 71 Note 16 Income Taxes 90
Note 7 Other Assets 83 Note 17 Earnings Per Share 91
Note 8 Deposits 84 Note 18 Segment Disclosures 92
Note 9 Other Liabilities 84 Note 19 Acquisition 94
Note 10 Subscription Receipts 85
Note 1 - Basis of Presentation
On May 27, 2025, the Board of Directors authorized the publication of the
Bank's unaudited interim condensed consolidated financial statements (the
Consolidated Financial Statements) for the quarter and six-month period ended
April 30, 2025.
The Bank's Consolidated Financial Statements were prepared in accordance with
IAS 34 - Interim Financial Reporting as issued by the International Accounting
Standards Board (IASB), using the same accounting policies as those described
in Note 1 to the audited annual consolidated financial statements for the year
ended October 31, 2024 except for the addition of the accounting policy for
finance leases, described below, resulting from the acquisition of Canadian
Western Bank (CWB). As the Consolidated Financial Statements do not include
all of the information required for full annual financial statements, they
should be read in conjunction with the audited annual consolidated financial
statements for the year ended October 31, 2024. The financial results of CWB
have been consolidated in the Bank's financial statements as of February 3,
2025 and have been recorded in the Personal and Commercial, Wealth Management
and Financial Markets segments and in the Other heading of segment
disclosures.
Leases
Bank as the lessor
When the Bank is the lessor, the contracts are classified as finance leases if
they transfer substantially all of the risks and rewards of ownership of the
underlying asset to the lessee, otherwise they are classified as operating
leases. For finance leases, a receivable is recorded in Loans on the
Consolidated Balance Sheet for an amount equal to the net investment in the
finance leases, which represents the minimum payments receivable from the
lessee plus any unguaranteed residual value expected to be recovered at the
end of the finance leases, discounted at the interest rate implicit in the
lease. Finance lease receivables are subsequently recorded at an amount equal
to the net investment in the lease, net of allowances for expected credit
losses. Interest income is recognized over the term of the lease in Interest
income in the Consolidated Statement of Income. For operating leases, the
leased assets remain on the Consolidated Balance Sheet and are reported in
Premises and equipment, and the rental income is recognized in Non-interest
income in the Consolidated Statement of Income.
Judgment, Estimates and Assumptions
In preparing consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) as issued by the IASB,
management must exercise judgment and make estimates and assumptions that
affect the reporting date carrying values of assets and liabilities, net
income, and related information. Some of the Bank's accounting policies, such
as measurement of expected credit losses (ECLs), require particularly complex
judgments and estimates. See Note 1 to the audited annual consolidated
financial statements for the year ended October 31, 2024 for a summary of the
most significant estimation processes used to prepare the Consolidated
Financial Statements and for the valuation techniques used to determine the
carrying values and fair values of assets and liabilities. In addition,
valuation techniques used for assets and liabilities resulting from the CWB
acquisition are described below.
The geopolitical landscape, notably the measures affecting trade relations
between Canada and its partners, including the imposition of tariffs and any
measures taken in response to such tariffs, the Russia-Ukraine war and clashes
between Israel and Hamas, inflation, climate change, and previously high
interest rates continue to create uncertainty. As a result, establishing
reliable estimates and applying judgment continue to be substantially complex.
The uncertainty surrounding certain key inputs used in measuring ECLs is
described in Note 6 to these Consolidated Financial Statements.
CWB acquisition - Valuation of Assets and Liabilities
The Bank used significant judgment and assumptions to determine the fair value
of the CWB assets acquired and liabilities assumed, including the loan
portfolio, core-deposit and customer relationship intangible assets and
deposits.
For loans, fair value was determined by discounting the estimated cash flows
expected to be received on all purchased loans back to their present value.
Management's best estimate of current key assumptions such as default rates,
loss severity, timing of prepayments options and collateral was used to
estimate expected cash flows. In determining the discount rate, various inputs
were considered, including the risk-free interest rates in the current market,
the risk premium associated with the loans and the cost to service the
portfolios.
For core-deposit intangible assets, fair value was determined using a
discounted cash flow approach, comparing the present value of the cost to
maintain the acquired core deposits to the cost of alternative funding. The
present value of the cost to maintain the acquired core deposits includes an
estimate of future interest costs and operating expenses for these deposits
acquired. Core deposits are those that are considered to be stable,
below-market sources of funding, whereas the present value of the cost of
alternative funding includes an estimate of future interest costs that would
be incurred if the funds were borrowed from the public market. Deposit run-off
was estimated using historical attrition data, comparing this to market
sources at the date of acquisition.
The fair value of customer relationships acquired was determined based on the
excess of estimated future cash inflows based on revenue from the acquired
relationships over the related estimated cash outflows over the estimated
useful life of the customer base.
For the deposits, fair value was determined by discounting the estimated cash
flows to be repaid, back to their present value. The timing and amount of cash
flows involve significant management judgment regarding the likelihood of
early redemption and the timing of withdrawal by the customer. Discount rates
were based on the prevailing rates that were paid on similar deposits at the
date of acquisition.
The fair value of all other assets and liabilities was calculated using market
data where possible, as well as management judgment to determine the price
that would be obtained in an arms-length transaction between knowledgeable,
willing parties.
For additional information, see Note 19 to these Consolidated Financial
Statements.
Unless otherwise indicated, all amounts are expressed in Canadian dollars,
which is the Bank's functional and presentation currency.
Note 2 - Future Accounting Policy Changes
The Bank closely monitors both new accounting standards and amendments to
existing accounting standards issued by the IASB. There have been no
significant updates to the future accounting policy changes disclosed in Note
3 to the audited annual consolidated financial statements for the year ended
October 31, 2024. The Bank is currently assessing the impact of applying these
standards on the consolidated financial statements.
Note 3 - Fair Value of Financial Instruments
Fair Value and Carrying Value of Financial Instruments by Category
Financial assets and financial liabilities are recognized on the Consolidated
Balance Sheet at fair value or at amortized cost in accordance with the
categories set out in the accounting framework for financial instruments.
As at April 30, 2025
Carrying value Carrying value Fair Total carrying value Total
and fair value value fair
value
Financial instruments classified as at fair value through profit or loss Financial instruments designated at fair value through profit or loss Debt securities classified as at fair value through other comprehensive income Equity securities Financial instruments at amortized cost, net Financial instruments at amortized cost, net
designated at
fair value
through other
comprehensive
income
Financial assets
Cash and deposits with financial
institutions − − − − 31,422 31,422 31,422 31,422
Securities 132,730 362 19,689 412 15,450 15,593 168,643 168,786
Securities purchased under reverse
repurchase agreements
and securities borrowed − − − − 20,836 20,836 20,836 20,836
Loans, net of allowances 15,997 − − − 269,731 271,429 285,728 287,426
Other
Derivative financial instruments 13,649 − − − − − 13,649 13,649
Other assets 1,198 − − − 3,563 3,563 4,761 4,761
Financial liabilities
Deposits((1)) − 29,249 358,725 359,698 387,974 388,947
Other
Obligations related to securities sold short 13,871 − − − 13,871 13,871
Obligations related to securities sold under
repurchase agreements and
securities loaned − − 40,984 40,984 40,984 40,984
Derivative financial instruments 18,096 − − − 18,096 18,096
Liabilities related to transferred receivables − 12,105 17,298 17,663 29,403 29,768
Other liabilities − − 5,389 5,389 5,389 5,389
Subordinated debt − − 2,822 2,862 2,822 2,862
(1) Includes embedded derivative financial instruments.
As at October 31, 2024
Carrying value and Carrying value Fair Total carrying value Total
fair value value fair
value
Financial instruments classified as at fair value through profit or loss Financial instruments designated at fair value through profit or loss Debt securities classified as at fair value through other comprehensive income Equity securities Financial instruments at amortized cost, net Financial instruments at amortized cost, net
designated at
fair value
through other
comprehensive
income
Financial assets
Cash and deposits with financial
institutions − − − − 31,549 31,549 31,549 31,549
Securities 115,578 357 13,956 666 14,608 14,551 145,165 145,108
Securities purchased under reverse
repurchase agreements
and securities borrowed − − − − 16,265 16,265 16,265 16,265
Loans, net of allowances 14,972 − − − 228,060 229,614 243,032 244,586
Other
Derivative financial instruments 12,309 − − − − − 12,309 12,309
Other assets 2,059 − − − 3,674 3,674 5,733 5,733
Financial liabilities
Deposits((1)) − 26,190 307,355 307,553 333,545 333,743
Other
Obligations related to securities sold short 10,873 − − − 10,873 10,873
Obligations related to securities sold under
repurchase agreements and
securities loaned − − 38,177 38,177 38,177 38,177
Derivative financial instruments 15,760 − − − 15,760 15,760
Liabilities related to transferred receivables − 11,034 17,343 17,011 28,377 28,045
Other liabilities − − 4,114 4,114 4,114 4,114
Subordinated debt − − 1,258 1,296 1,258 1,296
(1) Includes embedded derivative financial instruments.
Establishing Fair Value
The fair value of a financial instrument is the price that would be received
to sell a financial asset or paid to transfer a financial liability in an
orderly transaction in the principal market at the measurement date under
current market conditions (i.e., an exit price).
Unadjusted quoted prices in active markets provide the best evidence of fair
value. When there is no quoted price in an active market, the Bank applies
other valuation techniques that maximize the use of relevant observable inputs
and that minimize the use of unobservable inputs. Such valuation techniques
include the following: using information available from recent market
transactions, referring to the current fair value of a comparable financial
instrument, applying discounted cash flow analysis, applying option pricing
models, or relying on any other valuation technique that is commonly used by
market participants and has proven to yield reliable estimates. Judgment is
required when applying many of the valuation techniques. The Bank's valuations
were based on its assessment of the conditions prevailing as at April 30,
2025 and may change in the future. Furthermore, there may be measurement
uncertainty resulting from the choice of valuation model used.
Fair value is established in accordance with a rigorous control framework. The
Bank has policies and procedures that govern the process for determining fair
value. The Bank's valuation governance structure has remained largely
unchanged from that described in Note 4 to the audited annual consolidated
financial statements for the year ended October 31, 2024. The valuation
techniques used to determine the fair value of financial assets and financial
liabilities are also described in this note, and no significant changes have
been made to the valuation techniques.
Note 3 - Fair Value of Financial Instruments (cont.)
Financial Instruments Recorded at Fair Value in the Consolidated Balance Sheet
Hierarchy of Fair Value Measurements
IFRS establish a fair value measurement hierarchy that classifies the inputs
used in financial instrument fair value measurement techniques according to
three levels. This fair value hierarchy requires observable market inputs in
an active market to be used whenever such inputs exist. According to the
hierarchy, the highest level of inputs are unadjusted quoted prices in active
markets for identical instruments and the lowest level of inputs are
unobservable inputs. In some cases, the inputs used to measure the fair value
of a financial instrument might be categorized within different levels of the
fair value hierarchy. In those cases, the fair value measurement is
categorized in its entirety in the same level of the fair value hierarchy as
the lowest level input that is significant to the entire measurement. For
additional information, see Note 4 to the audited annual consolidated
financial statements for the year ended October 31, 2024.
Transfers of financial instruments between Levels 1 and 2 and transfers to (or
from) Level 3 are deemed to have taken place at the beginning of the quarter
in which the transfer occurred. Significant transfers can occur between the
fair value hierarchy levels due to new information on inputs used to determine
fair value and the observable nature of those inputs.
During the quarter ended April 30, 2025, $5 million in securities classified
as at fair value through profit or loss and $2 million in obligations related
to securities sold short were transferred from Level 2 to Level 1 as a result
of changing market conditions ($5 million in securities classified as at fair
value through profit or loss and $1 million in obligations related to
securities sold short during the quarter ended April 30, 2024). Also, during
the quarter ended April 30, 2025, $4 million in securities classified as at
fair value through profit or loss were transferred from Level 1 to Level 2 as
a result of changing market conditions (no transfer during the quarter ended
April 30, 2024). During the six-month periods ended April 30, 2025 and 2024,
financial instruments were transferred to (or from) Level 3 due to changes in
the availability of observable market inputs as a result of changing market
conditions.
The following tables show financial instruments recorded at fair value on the
Consolidated Balance Sheet according to the fair value hierarchy.
As at April 30, 2025
Level 1 Level 2 Level 3 Total financial assets/liabilities at fair value
Financial assets
Securities
At fair value through profit or loss
Securities issued or guaranteed by
Canadian government 5,622 11,086 − 16,708
Canadian provincial and municipal governments − 8,670 − 8,670
U.S. Treasury, other U.S. agencies and other foreign governments 1,907 2,460 − 4,367
Other debt securities − 3,167 75 3,242
Equity securities 97,166 2,050 889 100,105
104,695 27,433 964 133,092
At fair value through other comprehensive income
Securities issued or guaranteed by
Canadian government 1,206 5,949 − 7,155
Canadian provincial and municipal governments − 4,274 − 4,274
U.S. Treasury, other U.S. agencies and other foreign governments 6,918 413 − 7,331
Other debt securities − 929 − 929
Equity securities − 236 176 412
8,124 11,801 176 20,101
Loans − 15,748 249 15,997
Other
Derivative financial instruments 1,130 12,428 91 13,649
Other assets - Other items − 1,135 63 1,198
113,949 68,545 1,543 184,037
Financial liabilities
Deposits((1)) − 33,711 − 33,711
Other
Obligations related to securities sold short 6,286 7,585 − 13,871
Derivative financial instruments 1,299 16,749 48 18,096
Liabilities related to transferred receivables − 12,105 − 12,105
7,585 70,150 48 77,783
(1) The amounts include the fair value of embedded derivative
financial instruments.
As at October 31, 2024
Level 1 Level 2 Level 3 Total financial
assets/liabilities
at fair value
Financial assets
Securities
At fair value through profit or loss
Securities issued or guaranteed by
Canadian government 4,150 10,330 − 14,480
Canadian provincial and municipal governments − 8,473 − 8,473
U.S. Treasury, other U.S. agencies and other foreign governments 1,169 1,046 − 2,215
Other debt securities − 3,030 60 3,090
Equity securities 85,414 1,655 608 87,677
90,733 24,534 668 115,935
At fair value through other comprehensive income
Securities issued or guaranteed by
Canadian government 170 5,048 − 5,218
Canadian provincial and municipal governments − 2,900 − 2,900
U.S. Treasury, other U.S. agencies and other foreign governments 4,805 186 − 4,991
Other debt securities − 847 − 847
Equity securities − 359 307 666
4,975 9,340 307 14,622
Loans − 14,767 205 14,972
Other
Derivative financial instruments 1,139 11,073 97 12,309
Other assets - Other items − 1,976 83 2,059
96,847 61,690 1,360 159,897
Financial liabilities
Deposits((1)) − 30,434 − 30,434
Other
Obligations related to securities sold short 6,052 4,821 − 10,873
Derivative financial instruments 1,976 13,758 26 15,760
Liabilities related to transferred receivables − 11,034 − 11,034
8,028 60,047 26 68,101
(1) The amounts include the fair value of embedded derivative
financial instruments.
Financial Instruments Classified in Level 3
The Bank classifies financial instruments in Level 3 when the valuation
technique is based on at least one significant input that is not observable in
the markets. The Bank maximizes the use of observable inputs to determine the
fair value of financial instruments.
For a description of the valuation techniques and significant unobservable
inputs used in determining the fair value of financial instruments classified
in Level 3, see Note 4 to the audited annual consolidated financial
statements for the year ended October 31, 2024. For the quarter and six-month
period ended April 30, 2025, no significant change was made to the valuation
techniques and significant unobservable inputs used in determining fair value.
Sensitivity Analysis of Financial Instruments Classified in Level 3
The Bank performs sensitivity analyses for the fair value measurements of
Level 3 financial instruments, substituting unobservable inputs with one or
more reasonably possible alternative assumptions. For additional information
on how a change in an unobservable input might affect the fair value
measurements of Level 3 financial instruments, see Note 4 to the audited
annual consolidated financial statements for the year ended
October 31, 2024. For the six-month period ended April 30, 2025, there were
no significant changes in the sensitivity analyses of Level 3 financial
instruments.
Note 3 - Fair Value of Financial Instruments (cont.)
Change in the Fair Value of Financial Instruments Classified in Level 3
The Bank may hedge the fair value of financial instruments classified in the
various levels through offsetting hedge positions. Gains and losses on
financial instruments classified in Level 3 presented in the following tables
do not reflect the inverse gains and losses on financial instruments used for
economic hedging purposes that may have been classified in Level 1 or Level 2
by the Bank. In addition, the Bank may hedge the fair value of financial
instruments classified in Level 3 using other financial instruments classified
in Level 3. The effect of these hedges is not included in the net amount
presented in the following tables. The gains and losses presented hereafter
may comprise changes in fair value based on observable and unobservable
inputs.
Six months ended April 30, 2025
Securities Securities Loans and Derivative
at fair value at fair value other assets financial
through profit through other instruments((1))
or loss comprehensive
income
Fair value as at October 31, 2024 668 307 288 71
Total realized and unrealized gains (losses) included in Net income ((2)) 21 − 5 (17)
Total realized and unrealized gains (losses) included in
Other comprehensive income − (18) − −
Purchases 399 15 − −
Sales (124) (128) (4) −
Issuances − − 62 −
Settlements and other − − (39) (14)
Financial instruments transferred into Level 3 − − − 1
Financial instruments transferred out of Level 3 − − − 2
Fair value as at April 30, 2025 964 176 312 43
Change in unrealized gains and losses included in Net income with respect
to financial assets and financial liabilities held as at April 30, 2025((3)) 6 − (1) (17)
Six months ended April 30, 2024
Securities Securities Loans and Derivative
at fair value at fair value other assets financial
through profit through other instruments((1))
or loss comprehensive
income
Fair value as at October 31, 2023 551 378 290 (15)
Total realized and unrealized gains (losses) included in Net income ((4)) 36 − 7 (4)
Total realized and unrealized gains (losses) included in
Other comprehensive income − (7) − −
Purchases 22 − − −
Sales (11) (9) (2) −
Issuances − − 10 −
Settlements and other − − (25) 200
Financial instruments transferred into Level 3 − − − (1)
Financial instruments transferred out of Level 3 − − − 2
Fair value as at April 30, 2024 598 362 280 182
Change in unrealized gains and losses included in Net income with respect
to financial assets and financial liabilities held as at April 30, 2024((5)) 81 − 7 (4)
(1) The derivative financial instruments include assets and
liabilities presented on a net basis.
(2) Total gains (losses) included in Non-interest income was a gain
of $9 million.
(3) Total unrealized gains (losses) included in Non-interest income
was an unrealized loss of $12 million.
(4) Total gains (losses) included in Non-interest income was a gain
of $39 million.
(5) Total unrealized gains (losses) included in Non-interest income
was an unrealized gain of $84 million.
Note 4 - Financial Instruments Designated at Fair Value Through Profit or Loss
The Bank chose to designate certain financial instruments at fair value
through profit or loss according to the criteria presented in Note 1 to the
audited annual consolidated financial statements for the year ended
October 31, 2024. Consistent with its risk management strategy and in
accordance with the fair value option, which permits the designation if it
eliminates or significantly reduces a measurement or recognition inconsistency
that would otherwise arise from measuring financial assets or financial
liabilities or recognizing the gains and losses thereon on different bases,
the Bank designated certain securities and certain liabilities related to
transferred receivables at fair value through profit or loss. The fair value
of liabilities related to transferred receivables does not include credit
risk, as the holders of these liabilities are not exposed to the Bank's credit
risk. The Bank also designated certain deposits that include embedded
derivative financial instruments at fair value through profit or loss.
To determine a change in fair value arising from a change in the credit risk
of deposits designated at fair value through profit or loss, the Bank
calculates, at the beginning of the period, the present value of the
instrument's contractual cash flows using the following rates: first, an
observed discount rate for similar securities that reflects the Bank's credit
spread and, then, a rate that excludes the Bank's credit spread. The
difference obtained between the two values is then compared to the difference
obtained using the same rates at the end of the period.
Information about the financial assets and financial liabilities designated at
fair value through profit or loss is provided in the following tables.
Carrying Unrealized Unrealized Unrealized
value as at gains (losses) for gains (losses) for gains (losses) since
April 30, 2025 the quarter ended the six months ended the initial recognition
April 30, 2025 April 30, 2025 of the instrument
Financial assets designated at fair value through profit or loss
Securities 362 1 4 12
Financial liabilities designated at fair value through profit or loss
Deposits((1)(2)) 29,249 146 131 1,929
Liabilities related to transferred receivables 12,105 (66) (160) (38)
41,354 80 (29) 1,891
Carrying Unrealized Unrealized Unrealized
value as at gains (losses) for gains (losses) for gains (losses) since
April 30, 2024 the quarter ended the six months ended the initial recognition
April 30, 2024 April 30, 2024 of the instrument
Financial assets designated at fair value through profit or loss
Securities 417 (6) 2 (5)
Financial liabilities designated at fair value through profit or loss
Deposits((1)(2)) 22,953 11 (1,745) 2,165
Liabilities related to transferred receivables 10,231 75 (96) 451
33,184 86 (1,841) 2,616
(1) For the quarter ended April 30, 2025, the change in the fair
value of deposits designated at fair value through profit or loss attributable
to credit risk, and recorded in Other comprehensive income, resulted in a gain
of $151 million ($233 million loss for the quarter ended April 30, 2024).
For the six-month period ended April 30, 2025, this change resulted in a gain
of $176 million ($461 million loss for the six-month period ended April 30,
2024).
(2) The amount at maturity that the Bank will be contractually
required to pay to the holders of these deposits varies and will differ from
the reporting date fair value.
Note 5 - Securities
Credit Quality
As at April 30, 2025 and as at October 31, 2024, securities at fair value
through other comprehensive income and securities at amortized cost were
mainly classified in Stage 1, with their credit quality falling mostly in the
"Excellent" category according to the Bank's internal risk-rating categories.
For additional information on the reconciliation of allowances for credit
losses, see Note 6 to these Consolidated Financial Statements.
Unrealized Gross Gains (Losses) on Securities at Fair Value Through Other
Comprehensive Income((1))
As at April 30, 2025
Amortized Unrealized gross gains Unrealized gross losses Carrying
cost value((2))
Securities issued or guaranteed by
Canadian government 7,016 158 (19) 7,155
Canadian provincial and municipal governments 4,237 71 (34) 4,274
U.S. Treasury, other U.S. agencies and other foreign governments 7,195 146 (10) 7,331
Other debt securities 955 6 (32) 929
Equity securities 341 74 (3) 412
19,744 455 (98) 20,101
As at October 31, 2024
Amortized Unrealized gross gains Unrealized gross losses Carrying
cost value((2))
Securities issued or guaranteed by
Canadian government 5,166 96 (44) 5,218
Canadian provincial and municipal governments 2,894 45 (39) 2,900
U.S. Treasury, other U.S. agencies and other foreign governments 4,986 37 (32) 4,991
Other debt securities 888 3 (44) 847
Equity securities 591 77 (2) 666
14,525 258 (161) 14,622
(1) Excludes the impact of hedging.
(2) The allowances for credit losses on securities at fair value
through other comprehensive income (excluding equity securities), representing
$3 million as at April 30, 2025 ($3 million as at October 31, 2024), are
reported in Other comprehensive income. For additional information, see Note 6
to these Consolidated Financial Statements.
Equity Securities Designated at Fair Value Through Other Comprehensive Income
The Bank designated certain equity securities, the main business objective of
which is to generate dividend income, at fair value through other
comprehensive income without subsequent reclassification of gains and losses
to net income. During the six-month period ended April 30, 2025, a dividend
income amount of $18 million was recognized for these investments
($30 million for the six-month period ended April 30, 2024), including
amounts of $1 million for investments that were sold during the six-month
period ended April 30, 2025 ($2 million for investments that were sold during
the six-month period ended April 30, 2024).
Six months ended April 30, 2025 Six months ended April 30, 2024
Equity securities of private companies Equity securities of Total Equity securities of private companies Equity securities of Total
public companies public companies
Fair value at beginning 307 359 666 378 281 659
Change in fair value (18) 5 (13) (7) 51 44
Designated at fair value through
other comprehensive income 15 66 81 − 102 102
Sales((1)) (128) (194) (322) (9) (123) (132)
Fair value at end 176 236 412 362 311 673
(1) The Bank disposed of private and public company equity
securities for economic reasons.
Securities at Amortized Cost
As at April 30, 2025 As at October 31, 2024
Securities issued or guaranteed by
Canadian government 9,290 9,194
Canadian provincial and municipal governments 3,957 2,458
U.S. Treasury, other U.S. agencies and other foreign governments 260 687
Other debt securities 1,949 2,275
Gross carrying value 15,456 14,614
Allowances for credit losses 6 6
Carrying value 15,450 14,608
Gains (Losses) on Disposals of Securities at Amortized Cost
During the six-month periods ended April 30, 2025 and 2024, the Bank disposed
of certain debt securities measured at amortized cost. The carrying value of
these securities upon disposal was $195 million for the six-month period ended
April 30, 2025 ($180 million for the six-month period ended April 30, 2024),
and the Bank recognized gains of $5 million for the six-month period ended
April 30, 2025 ($1 million for the six-month period ended April 30, 2024) in
Non-interest income - Gains (losses) on non-trading securities, net in the
Consolidated Statement of Income.
Note 6 - Loans and Allowances for Credit Losses
Determining and Measuring Expected Credit Losses (ECL)
Determining Expected Credit Losses
Expected credit losses are determined using a three-stage impairment approach
that is based on the change in the credit quality of financial assets since
initial recognition.
Non-Impaired Loans
Stage 1
Financial assets that have experienced no significant increase in credit risk
between initial recognition and the reporting date, and for which 12-month
expected credit losses are recorded at the reporting date, are classified in
Stage 1.
Stage 2
Financial assets that have experienced a significant increase in credit risk
between initial recognition and the reporting date, and for which lifetime
expected credit losses are recorded at the reporting date, are classified in
Stage 2.
Impaired Loans
Stage 3
Financial assets for which there is objective evidence of impairment, for
which one or more events have had a detrimental impact on the estimated future
cash flows of these financial assets at the reporting date, and for which
lifetime expected credit losses are recorded, are classified in Stage 3.
POCI
Financial assets that are credit-impaired when purchased or originated (POCI)
are classified in the POCI category.
For additional information, see Notes 1 and 8 to the audited annual
consolidated financial statements for the year ended October 31, 2024.
Credit Quality of Loans
The following tables present the gross carrying amounts of loans as at
April 30, 2025 and as at October 31, 2024, according to credit quality and
ECL impairment stage of each loan category at amortized cost, and according to
credit quality for loans at fair value through profit or loss. For additional
information on credit quality according to the Internal Ratings-Based (IRB)
categories, see the Internal Default Risk Ratings table on page 81 in the
Credit Risk section of the 2024 Annual Report.
Note 6 - Loans and Allowances for Credit Losses (cont.)
As at April 30, 2025
Non-impaired loans Impaired loans Loans at fair value Total
through profit or loss((1))
Stage 1 Stage 2
Residential mortgage
Excellent 35,580 11 − − 35,591
Good 17,115 169 − − 17,284
Satisfactory 14,015 3,889 − − 17,904
Special mention 366 784 − − 1,150
Substandard 80 322 − − 402
Default − − 147 − 147
IRB Approach 67,156 5,175 147 − 72,478
Standardized Approach 20,116 754 882 14,277 36,029
Gross carrying amount 87,272 5,929 1,029 14,277 108,507
Allowances for credit losses((2)) 81 88 80 − 249
Carrying amount 87,191 5,841 949 14,277 108,258
Personal
Excellent 22,188 96 − − 22,284
Good 7,079 1,240 − − 8,319
Satisfactory 7,379 2,025 − − 9,404
Special mention 1,955 860 − − 2,815
Substandard 47 294 − − 341
Default − − 243 − 243
IRB Approach 38,648 4,515 243 − 43,406
Standardized Approach 3,836 88 203 − 4,127
Gross carrying amount 42,484 4,603 446 − 47,533
Allowances for credit losses((2)) 104 135 169 − 408
Carrying amount 42,380 4,468 277 − 47,125
Credit card
Excellent 342 − − − 342
Good 466 − − − 466
Satisfactory 846 21 − − 867
Special mention 546 250 − − 796
Substandard 45 156 − − 201
Default − − − − −
IRB Approach 2,245 427 − − 2,672
Standardized Approach 157 6 − − 163
Gross carrying amount 2,402 433 − − 2,835
Allowances for credit losses((2)) 38 127 − − 165
Carrying amount 2,364 306 − − 2,670
Business and government
Excellent 4,875 4 − 1,525 6,404
Good 27,422 3 − 8 27,433
Satisfactory 38,075 12,281 − 143 50,499
Special mention 308 1,468 − − 1,776
Substandard 2 673 − − 675
Default − − 799 − 799
IRB Approach 70,682 14,429 799 1,676 87,586
Standardized Approach 35,534 4,787 840 44 41,205
Gross carrying amount 106,216 19,216 1,639 1,720 128,791
Allowances for credit losses((2)) 335 353 428 − 1,116
Carrying amount 105,881 18,863 1,211 1,720 127,675
Total loans
Gross carrying amount 238,374 30,181 3,114 15,997 287,666
Allowances for credit losses((2)) 558 703 677 − 1,938
Carrying amount 237,816 29,478 2,437 15,997 285,728
(1) Not subject to expected credit losses.
(2) The allowances for credit losses do not include the amounts
related to undrawn commitments reported in the Other liabilities item of the
Consolidated Balance Sheet.
As at October 31, 2024
Non-impaired loans Impaired loans Loans at fair value Total
through profit or loss((1))
Stage 1 Stage 2
Residential mortgage
Excellent 33,651 16 − − 33,667
Good 17,063 241 − − 17,304
Satisfactory 12,634 4,209 − − 16,843
Special mention 358 800 − − 1,158
Substandard 70 300 − − 370
Default − − 118 − 118
IRB Approach 63,776 5,566 118 − 69,460
Standardized Approach 11,350 266 741 13,192 25,549
Gross carrying amount 75,126 5,832 859 13,192 95,009
Allowances for credit losses((2)) 62 85 50 − 197
Carrying amount 75,064 5,747 809 13,192 94,812
Personal
Excellent 21,702 274 − − 21,976
Good 6,686 1,618 − − 8,304
Satisfactory 6,959 2,247 − − 9,206
Special mention 2,111 845 − − 2,956
Substandard 53 279 − − 332
Default − − 226 − 226
IRB Approach 37,511 5,263 226 − 43,000
Standardized Approach 3,580 84 219 − 3,883
Gross carrying amount 41,091 5,347 445 − 46,883
Allowances for credit losses((2)) 102 123 135 − 360
Carrying amount 40,989 5,224 310 − 46,523
Credit card
Excellent 551 − − − 551
Good 399 − − − 399
Satisfactory 729 28 − − 757
Special mention 484 211 − − 695
Substandard 69 149 − − 218
Default − − − − −
IRB Approach 2,232 388 − − 2,620
Standardized Approach 141 − − − 141
Gross carrying amount 2,373 388 − − 2,761
Allowances for credit losses((2)) 42 114 − − 156
Carrying amount 2,331 274 − − 2,605
Business and government
Excellent 7,743 − − 1,486 9,229
Good 27,950 7 − 53 28,010
Satisfactory 34,626 11,381 − 147 46,154
Special mention 255 1,770 − − 2,025
Substandard 2 481 2 − 485
Default − − 565 − 565
IRB Approach 70,576 13,639 567 1,686 86,468
Standardized Approach 12,879 107 172 94 13,252
Gross carrying amount 83,455 13,746 739 1,780 99,720
Allowances for credit losses((2)) 218 181 229 − 628
Carrying amount 83,237 13,565 510 1,780 99,092
Total loans
Gross carrying amount 202,045 25,313 2,043 14,972 244,373
Allowances for credit losses((2)) 424 503 414 − 1,341
Carrying amount 201,621 24,810 1,629 14,972 243,032
(1) Not subject to expected credit losses.
(2) The allowances for credit losses do not include the amounts
related to undrawn commitments reported in the Other liabilities item of the
Consolidated Balance Sheet.
Note 6 - Loans and Allowances for Credit Losses (cont.)
The following table presents the credit risk exposures of off-balance-sheet
commitments as at April 30, 2025 and as at October 31, 2024 according to
credit quality and ECL impairment stage.
As at April 30, 2025 As at October 31, 2024
Stage 1 Stage 2 Impaired Total Stage 1 Stage 2 Impaired Total
Off-balance-sheet commitments((1))
Retail
Excellent 15,916 46 − 15,962 16,159 113 − 16,272
Good 4,675 351 − 5,026 3,492 415 − 3,907
Satisfactory 1,663 239 − 1,902 1,095 249 − 1,344
Special mention 431 131 − 562 381 112 − 493
Substandard 21 48 − 69 30 35 − 65
Default − − 2 2 − − 1 1
Non-retail
Excellent 13,650 − − 13,650 13,071 − − 13,071
Good 21,749 − − 21,749 22,547 − − 22,547
Satisfactory 15,714 7,658 − 23,372 15,513 6,351 − 21,864
Special mention 24 220 − 244 24 278 − 302
Substandard 21 167 − 188 2 52 − 54
Default − − 14 14 − − 27 27
IRB Approach 73,864 8,860 16 82,740 72,314 7,605 28 79,947
Standardized Approach 29,683 883 61 30,627 18,968 − − 18,968
Total exposure 103,547 9,743 77 113,367 91,282 7,605 28 98,915
Allowances for credit losses 165 86 2 253 142 72 − 214
Total exposure, net
of allowances 103,382 9,657 75 113,114 91,140 7,533 28 98,701
(1) Represent letters of guarantee and documentary letters of
credit, undrawn commitments, and backstop liquidity and credit enhancement
facilities.
Loans Past Due But Not Impaired((1))
As at April 30, 2025 As at October 31, 2024
Residential Personal Credit card Business and Residential Personal Credit card Business and
mortgage government mortgage government
Past due but not impaired
31 to 60 days 262 142 31 242 179 121 30 76
61 to 90 days 150 45 18 101 82 48 14 33
Over 90 days((2)) − − 38 − − − 35 −
412 187 87 343 261 169 79 109
(1) Loans less than 31 days past due are not presented as they are
not considered past due from an administrative standpoint.
(2) All loans more than 90 days past due, except for credit card
receivables, are considered impaired (Stage 3).
Impaired Loans
As at April 30, 2025 As at October 31, 2024
Gross Allowances for Net Gross Allowances for Net
credit losses credit losses
Residential mortgage 1,029 80 949 859 50 809
Personal 446 169 277 445 135 310
Credit card((1)) − − − − − −
Business and government 1,639 428 1,211 739 229 510
3,114 677 2,437 2,043 414 1,629
(1) Credit card receivables are considered impaired, at the
latest, when payment is 180 days past due, and they are written off at that
time.
Allowances for Credit Losses
The following tables present a reconciliation of the allowances for credit
losses by Consolidated Balance Sheet item and by type of off-balance-sheet
commitment.
Quarter ended April 30, 2025
Allowances for Provisions for Write-offs((1)) Disposals Recoveries Allowances for
credit losses as at credit losses and other credit losses as at
January 31, 2025 April 30, 2025
Balance sheet
Cash and deposits with financial institutions((2)(3)) 11 (2) − − − 9
Securities((3))
At fair value through other comprehensive income((4)) 4 (1) − − − 3
At amortized cost((2)) 6 − − − − 6
Securities purchased under reverse repurchase
agreements and securities borrowed((2)(3)) − − − − − −
Loans((5))
Residential mortgage 215 46 (8) − (4) 249
Personal 395 57 (42) − (2) 408
Credit card 157 34 (32) − 6 165
Business and government 716 385 (16) − 31 1,116
1,483 522 (98) − 31 1,938
Other assets((2)(3)) − − − − − −
Off-balance-sheet commitments((6))
Letters of guarantee and documentary letters of credit 22 1 − − − 23
Undrawn commitments 200 24 − − − 224
Backstop liquidity and credit enhancement facilities 5 1 − − − 6
227 26 − − − 253
1,731 545 (98) − 31 2,209
Quarter ended April 30, 2024
Allowances for Provisions for Write-offs((1)) Disposals Recoveries Allowances for
credit losses as at credit losses and other credit losses as at
January 31, 2024 April 30, 2024
Balance sheet
Cash and deposits with financial institutions((2)(3)) 7 1 − − − 8
Securities((3))
At fair value through other comprehensive income((4)) 3 − − − − 3
At amortized cost((2)) 3 − − − − 3
Securities purchased under reverse repurchase
agreements and securities borrowed((2)(3)) − − − − − −
Loans((5))
Residential mortgage 166 6 − (2) 2 172
Personal 293 53 (30) − 5 321
Credit card 144 23 (27) − 3 143
Business and government 556 63 (89) − 5 535
Customers' liability under acceptances 52 (12) − − − 40
1,211 133 (146) (2) 15 1,211
Other assets((2)(3)) − − − − − −
Off-balance-sheet commitments((6))
Letters of guarantee and documentary letters of credit 19 (1) − − − 18
Undrawn commitments 166 6 − − − 172
Backstop liquidity and credit enhancement facilities 7 (1) − − − 6
192 4 − − − 196
1,416 138 (146) (2) 15 1,421
(1) The contractual amount outstanding on financial assets that were
written off during the quarter ended April 30, 2025 and that are still
subject to enforcement activity was $63 million ($41 million for the quarter
ended April 30, 2024).
(2) These financial assets are presented net of the allowances for
credit losses on the Consolidated Balance Sheet.
(3) As at April 30, 2025 and 2024, these financial assets were mainly
classified in Stage 1 and their credit quality fell mostly within the
Excellent category.
(4) The allowances for credit losses are reported in the Accumulated
other comprehensive income item of the Consolidated Balance Sheet.
(5) The allowances for credit losses are reported in the Allowances for
credit losses item of the Consolidated Balance Sheet.
(6) The allowances for credit losses are reported in the Other
liabilities item of the Consolidated Balance Sheet.
Note 6 - Loans and Allowances for Credit Losses (cont.)
Six months ended April 30, 2025
Allowances for Provisions for Write-offs((1)) Disposals Recoveries Allowances for
credit losses as at credit losses and other credit losses as at
October 31, 2024 April 30, 2025
Balance sheet
Cash and deposits with financial institutions((2)(3)) 9 − − − − 9
Securities((3))
At fair value through other comprehensive income((4)) 3 − − − − 3
At amortized cost((2)) 6 − − − − 6
Securities purchased under reverse repurchase
agreements and securities borrowed((2)(3)) − − − − − −
Loans((5))
Residential mortgage 197 60 (9) − 1 249
Personal 360 123 (80) − 5 408
Credit card 156 62 (63) − 10 165
Business and government 628 515 (61) − 34 1,116
1,341 760 (213) − 50 1,938
Other assets((2)(3)) − − − − − −
Off-balance-sheet commitments((6))
Letters of guarantee and documentary letters of credit 21 2 − − − 23
Undrawn commitments 188 36 − − − 224
Backstop liquidity and credit enhancement facilities 5 1 − − − 6
214 39 − − − 253
1,573 799 (213) − 50 2,209
Six months ended April 30, 2024
Allowances for Provisions for Write-offs((1)) Disposals Recoveries Allowances for
credit losses as at credit losses and other credit losses as at
October 31, 2023 April 30, 2024
Balance sheet
Cash and deposits with financial institutions((2)(3)) 10 (2) − − − 8
Securities((3))
At fair value through other comprehensive income((4)) 3 − − − − 3
At amortized cost((2)) 4 (1) − − − 3
Securities purchased under reverse repurchase
agreements and securities borrowed((2)(3)) − − − − − −
Loans((5))
Residential mortgage 154 21 (1) (2) − 172
Personal 271 97 (53) − 6 321
Credit card 139 50 (53) − 7 143
Business and government 567 86 (133) − 15 535
Customers' liability under acceptances 53 (13) − − − 40
1,184 241 (240) (2) 28 1,211
Other assets((2)(3)) − − − − − −
Off-balance-sheet commitments((6))
Letters of guarantee and documentary letters of credit 16 2 − − − 18
Undrawn commitments 152 20 − − − 172
Backstop liquidity and credit enhancement facilities 8 (2) − − − 6
176 20 − − − 196
1,377 258 (240) (2) 28 1,421
(1) The contractual amount outstanding on financial assets that were
written off during the six-month period ended April 30, 2025 and that are
still subject to enforcement activity was $114 million ($76 million for the
six-month period ended April 30, 2024).
(2) These financial assets are presented net of the allowances for
credit losses on the Consolidated Balance Sheet.
(3) As at April 30, 2025 and 2024, these financial assets were mainly
classified in Stage 1 and their credit quality fell mostly within the
Excellent category.
(4) The allowances for credit losses are reported in the Accumulated
other comprehensive income item of the Consolidated Balance Sheet.
(5) The allowances for credit losses are reported in the Allowances for
credit losses item of the Consolidated Balance Sheet.
(6) The allowances for credit losses are reported in the Other
liabilities item of the Consolidated Balance Sheet.
The following tables present a reconciliation of allowances for credit losses
for each loan category at amortized cost according to ECL impairment stage.
Quarter ended April 30, 2025 Quarter ended April 30, 2024
Allowances for Allowances for Total Allowances for Allowances for Total
credit losses on credit losses on credit losses on credit losses on
non-impaired loans impaired loans((1)) non-impaired loans impaired loans((1))
Stage 1 Stage 2 Stage 1 Stage 2
Residential mortgage
Balance at beginning 63 86 66 215 71 91 4 166
Originations or purchases((2)) 15 − − 15 4 − − 4
Transfers((3)):
to Stage 1 11 (10) (1) − 16 (14) (2) −
to Stage 2 (2) 8 (6) − (2) 7 (5) −
to Stage 3 − (4) 4 − − (4) 4 −
Net remeasurement of loss allowances((4)) (4) 11 28 35 (16) 7 18 9
Derecognitions((5)) (1) (1) (2) (4) (2) (1) (4) (7)
Changes to models − − − − − − − −
Provisions for credit losses 19 4 23 46 − (5) 11 6
Write-offs − − (8) (8) − − − −
Disposals − − − − (2) − − (2)
Recoveries − − 2 2 − − − −
Foreign exchange movements and other (1) (2) (3) (6) 1 1 − 2
Balance at end 81 88 80 249 70 87 15 172
Includes:
Amounts drawn 81 88 80 249 70 87 15 172
Undrawn commitments((6)) − − − − − − − −
Personal
Balance at beginning 111 140 153 404 97 116 90 303
Originations or purchases 10 − − 10 6 − − 6
Transfers((3)):
to Stage 1 26 (22) (4) − 22 (19) (3) −
to Stage 2 (10) 12 (2) − (7) 9 (2) −
to Stage 3 − (24) 24 − (1) (19) 20 −
Net remeasurement of loss allowances((4)) (20) 38 40 58 (19) 44 30 55
Derecognitions((5)) (2) (3) (2) (7) (3) (3) (1) (7)
Changes to models − − − − − − − −
Provisions for credit losses 4 1 56 61 (2) 12 44 54
Write-offs − − (42) (42) − − (30) (30)
Disposals − − − − − − − −
Recoveries − − 5 5 − − 4 4
Foreign exchange movements and other (3) (1) (3) (7) 2 − (1) 1
Balance at end 112 140 169 421 97 128 107 332
Includes:
Amounts drawn 104 135 169 408 91 123 107 321
Undrawn commitments((6)) 8 5 − 13 6 5 − 11
(1) The total amount of undiscounted initially expected credit
losses on the POCI loans acquired during the quarter ended April 30, 2025 was
$379 million (no POCI loans had been acquired during the quarter ended April
30, 2024). The expected credit losses reflected in the purchase price have
been discounted.
(2) Include allowances for credit losses on impaired loans
acquired from CWB. For additional information, see Note 19.
(3) Represent stage transfers deemed to have taken place at the
beginning of the quarter in which the transfer occurred.
(4) Includes the net remeasurement of loss allowances (after
transfers) attributable mainly to changes in volumes and in the credit quality
of existing loans as well as to changes in risk parameters.
(5) Represent reversals to loss allowances arising from full loan
repayments (excluding write-offs and disposals).
(6) The allowances for credit losses on undrawn commitments are
reported in the Other liabilities item of the Consolidated Balance Sheet.
Note 6 - Loans and Allowances for Credit Losses (cont.)
Quarter ended April 30, 2025 Quarter ended April 30, 2024
Allowances for Allowances for Total Allowances for Allowances for Total
credit losses on credit losses on credit losses on credit losses on
non-impaired loans impaired loans((1)) non-impaired loans impaired loans((1))
Stage 1 Stage 2 Stage 1 Stage 2
Credit card
Balance at beginning 78 143 − 221 59 131 − 190
Originations or purchases((2)) 5 − − 5 3 − − 3
Transfers((3)):
to Stage 1 35 (35) − − 26 (26) − −
to Stage 2 (7) 7 − − (5) 5 − −
to Stage 3 − (15) 15 − (1) (11) 12 −
Net remeasurement of loss allowances((4)) (39) 62 11 34 (24) 33 12 21
Derecognitions((5)) (1) − − (1) − (1) − (1)
Changes to models − − − − − − − −
Provisions for credit losses (7) 19 26 38 (1) − 24 23
Write-offs − − (32) (32) − − (27) (27)
Disposals − − − − − − − −
Recoveries − − 6 6 − − 3 3
Foreign exchange movements and other − − − − − − − −
Balance at end 71 162 − 233 58 131 − 189
Includes:
Amounts drawn 38 127 − 165 33 110 − 143
Undrawn commitments((6)) 33 35 − 68 25 21 − 46
Business and government
Balance at beginning 318 238 287 843 276 213 229 718
Originations or purchases((2)) 246 − − 246 28 − − 28
Transfers((3)):
to Stage 1 13 (12) (1) − 9 (9) − −
to Stage 2 (116) 119 (3) − (10) 13 (3) −
to Stage 3 (2) (6) 8 − − (6) 6 −
Net remeasurement of loss allowances((4)) (2) 71 123 192 (3) 19 33 49
Derecognitions((5)) (18) (17) (2) (37) (13) (9) 1 (21)
Changes to models − − − − − − − −
Provisions for credit losses 121 155 125 401 11 8 37 56
Write-offs − − (16) (16) − − (89) (89)
Disposals − − − − − − − −
Recoveries − − 41 41 − − 4 4
Foreign exchange movements and other (3) − (7) (10) − − 1 1
Balance at end 436 393 430 1,259 287 221 182 690
Includes:
Amounts drawn 335 353 428 1,116 198 195 182 575
Undrawn commitments((6)) 101 40 2 143 89 26 − 115
Total allowances for credit losses at end((7)) 700 783 679 2,162 512 567 304 1,383
Includes:
Amounts drawn 558 703 677 1,938 392 515 304 1,211
Undrawn commitments((6)) 142 80 2 224 120 52 − 172
(1) The total amount of undiscounted initially expected credit
losses on the POCI loans acquired during the quarter ended April 30, 2025 was
$379 million (no POCI loans had been acquired during the quarter ended April
30,2024). The expected credit losses reflected in the purchase price have been
discounted.
(2) Include allowances for credit losses on impaired loans
acquired from CWB. For additional information, see Note 19.
(3) Represent stage transfers deemed to have taken place at the
beginning of the quarter in which the transfer occurred.
(4) Includes the net remeasurement of loss allowances (after
transfers) attributable mainly to changes in volumes and in the credit quality
of existing loans as well as to changes in risk parameters.
(5) Represent reversals to loss allowances arising from full loan
repayments (excluding write-offs and disposals).
(6) The allowances for credit losses on undrawn commitments are
reported in the Other liabilities item of the Consolidated Balance Sheet.
(7) Excludes allowances for credit losses on other financial
assets at amortized cost and on off-balance-sheet commitments other than
undrawn commitments.
Six months ended April 30, 2025 Six months ended April 30, 2024
Allowances for Allowances for Total Allowances for Allowances for Total
credit losses on credit losses on credit losses on credit losses on
non-impaired loans impaired loans((1)) non-impaired loans impaired loans((1))
Stage 1 Stage 2 Stage 1 Stage 2
Residential mortgage
Balance at beginning 62 85 50 197 69 93 (8) 154
Originations or purchases((2)) 19 − − 19 6 − − 6
Transfers((3)):
to Stage 1 24 (22) (2) − 32 (28) (4) −
to Stage 2 (4) 14 (10) − (5) 14 (9) −
to Stage 3 − (9) 9 − − (17) 17 −
Net remeasurement of loss allowances((4)) (19) 22 46 49 (24) 40 18 34
Derecognitions((5)) (2) (2) (4) (8) (4) (3) (6) (13)
Changes to models − − − − (2) (12) 8 (6)
Provisions for credit losses 18 3 39 60 3 (6) 24 21
Write-offs − − (9) (9) − − (1) (1)
Disposals − − − − (2) − − (2)
Recoveries − − 3 3 − − − −
Foreign exchange movements and other 1 − (3) (2) − − − −
Balance at end 81 88 80 249 70 87 15 172
Includes:
Amounts drawn 81 88 80 249 70 87 15 172
Undrawn commitments((6)) − − − − − − − −
Personal
Balance at beginning 107 127 135 369 95 114 72 281
Originations or purchases 20 − − 20 13 − − 13
Transfers((3)):
to Stage 1 52 (46) (6) − 43 (38) (5) −
to Stage 2 (21) 24 (3) − (12) 15 (3) −
to Stage 3 − (44) 44 − (1) (37) 38 −
Net remeasurement of loss allowances((4)) (41) 85 77 121 (36) 83 50 97
Derecognitions((5)) (4) (6) (4) (14) (5) (7) (2) (14)
Changes to models − − − − − (1) 3 2
Provisions for credit losses 6 13 108 127 2 15 81 98
Write-offs − − (80) (80) − − (53) (53)
Disposals − − − − − − − −
Recoveries − − 9 9 − − 8 8
Foreign exchange movements and other (1) − (3) (4) − (1) (1) (2)
Balance at end 112 140 169 421 97 128 107 332
Includes:
Amounts drawn 104 135 169 408 91 123 107 321
Undrawn commitments((6)) 8 5 − 13 6 5 − 11
(1) The total amount of undiscounted initially expected credit
losses on the POCI loans acquired during the six-month period ended April 30,
2025 was $379 million (no POCI loans had been acquired during the six-month
period ended April 30, 2024). The expected credit losses reflected in the
purchase price have been discounted.
(2) Include allowances for credit losses on impaired loans
acquired from CWB. For additional information, see Note 19.
(3) Represent stage transfers deemed to have taken place at the
beginning of the quarter in which the transfer occurred.
(4) Includes the net remeasurement of loss allowances (after
transfers) attributable mainly to changes in volumes and in the credit quality
of existing loans as well as to changes in risk parameters.
(5) Represent reversals to loss allowances arising from full loan
repayments (excluding write-offs and disposals).
(6) The allowances for credit losses on undrawn commitments are
reported in the Other liabilities item of the Consolidated Balance Sheet.
Note 6 - Loans and Allowances for Credit Losses (cont.)
Six months ended April 30, 2025 Six months ended April 30, 2024
Allowances for Allowances for Total Allowances for Allowances for Total
credit losses on credit losses on credit losses on credit losses on
non-impaired loans impaired loans((1)) non-impaired loans impaired loans((1))
Stage 1 Stage 2 Stage 1 Stage 2
Credit card
Balance at beginning 70 141 − 211 59 127 − 186
Originations or purchases((2)) 8 − − 8 5 − − 5
Transfers((3)):
to Stage 1 62 (62) − − 55 (55) − −
to Stage 2 (13) 13 − − (10) 10 − −
to Stage 3 − (28) 28 − (1) (21) 22 −
Net remeasurement of loss allowances((4)) (54) 98 25 69 (49) 71 24 46
Derecognitions((5)) (2) − − (2) (1) (1) − (2)
Changes to models − − − − − − − −
Provisions for credit losses 1 21 53 75 (1) 4 46 49
Write-offs − − (63) (63) − − (53) (53)
Disposals − − − − − − − −
Recoveries − − 10 10 − − 7 7
Foreign exchange movements and other − − − − − − − −
Balance at end 71 162 − 233 58 131 − 189
Includes:
Amounts drawn 38 127 − 165 33 110 − 143
Undrawn commitments((6)) 33 35 − 68 25 21 − 46
Business and government
Balance at beginning 308 215 229 752 251 220 244 715
Originations or purchases((2)) 283 − − 283 67 − − 67
Transfers((3)):
to Stage 1 27 (26) (1) − 18 (17) (1) −
to Stage 2 (128) 134 (6) − (23) 27 (4) −
to Stage 3 (2) (11) 13 − − (8) 8 −
Net remeasurement of loss allowances((4)) (24) 110 224 310 (4) 19 53 68
Derecognitions((5)) (27) (29) (3) (59) (21) (15) (2) (38)
Changes to models − − − − − (5) 1 (4)
Provisions for credit losses 129 178 227 534 37 1 55 93
Write-offs − − (61) (61) − − (133) (133)
Disposals − − − − − − − −
Recoveries − − 43 43 − − 18 18
Foreign exchange movements and other (1) − (8) (9) (1) − (2) (3)
Balance at end 436 393 430 1,259 287 221 182 690
Includes:
Amounts drawn 335 353 428 1,116 198 195 182 575
Undrawn commitments((6)) 101 40 2 143 89 26 − 115
Total allowances for credit losses at end((7)) 700 783 679 2,162 512 567 304 1,383
Includes:
Amounts drawn 558 703 677 1,938 392 515 304 1,211
Undrawn commitments((6)) 142 80 2 224 120 52 − 172
(1) The total amount of undiscounted initially expected credit
losses on the POCI loans acquired during the six-month period ended April 30,
2025 was $379 million (no POCI loans had been acquired during the six-month
period ended April 30,2024). The expected credit losses reflected in the
purchase price have been discounted.
(2) Include allowances for credit losses on impaired loans
acquired from CWB. For additional information, see Note 19.
(3) Represent stage transfers deemed to have taken place at the
beginning of the quarter in which the transfer occurred.
(4) Includes the net remeasurement of loss allowances (after
transfers) attributable mainly to changes in volumes and in the credit quality
of existing loans as well as to changes in risk parameters.
(5) Represent reversals to loss allowances arising from full loan
repayments (excluding write-offs and disposals).
(6) The allowances for credit losses on undrawn commitments are
reported in the Other liabilities item of the Consolidated Balance Sheet.
(7) Excludes allowances for credit losses on other financial
assets at amortized cost and on off-balance-sheet commitments other than
undrawn commitments.
Main Macroeconomic Factors
The following tables show the main macroeconomic factors used to estimate the
allowances for credit losses on loans. For each scenario, namely, the base
scenario, upside scenario, and downside scenario, the average values of the
macroeconomic factors over the next 12 months (used for Stage 1 credit loss
calculations) and over the remaining forecast period (used for Stage 2 credit
loss calculations) are presented.
As at April 30, 2025
Base scenario Upside scenario Downside scenario
Next Remaining Next Remaining Next Remaining
12 months forecast period 12 months forecast period 12 months forecast period
Macroeconomic factors((1))
GDP growth((2)) (0.1) % 1.8 % 1.6 % 2.2 % (5.4) % 2.7 %
Unemployment rate 7.2 % 6.8 % 6.6 % 5.9 % 8.8 % 8.1 %
Housing price index growth((2)) (0.3) % 2.6 % 9.7 % 2.4 % (13.9) % 0.3 %
BBB spread((3)) 2.0 % 1.7 % 1.4 % 1.4 % 3.2 % 2.4 %
S&P/TSX growth((2)(4)) (9.1) % 2.8 % 4.0 % 3.0 % (25.6) % 5.5 %
WTI oil price((5)) (US$ per barrel) 62 68 84 79 42 52
As at January 31, 2025
Base scenario Upside scenario Downside scenario
Next Remaining Next Remaining Next Remaining
12 months forecast period 12 months forecast period 12 months forecast period
Macroeconomic factors((1))
GDP growth((2)) 1.4 % 1.7 % 1.6 % 2.1 % (5.4) % 2.7 %
Unemployment rate 7.0 % 6.5 % 6.7 % 6.0 % 8.9 % 8.1 %
Housing price index growth((2)) 6.4 % 2.7 % 9.7 % 2.4 % (13.9) % 0.3 %
BBB spread((3)) 2.0 % 1.7 % 1.4 % 1.4 % 3.2 % 2.4 %
S&P/TSX growth((2)(4)) (8.4) % 2.8 % 4.0 % 3.0 % (25.6) % 5.5 %
WTI oil price((5)) (US$ per barrel) 67 69 82 78 41 51
As at October 31, 2024
Base scenario Upside scenario Downside scenario
Next Remaining Next Remaining Next Remaining
12 months forecast period 12 months forecast period 12 months forecast period
Macroeconomic factors((1))
GDP growth((2)) 1.2 % 2.0 % 1.9 % 2.1 % (5.2) % 2.7 %
Unemployment rate 7.3 % 6.7 % 6.5 % 5.8 % 8.7 % 7.9 %
Housing price index growth((2)) 4.1 % 2.6 % 7.7 % 2.4 % (13.9) % 0.3 %
BBB spread((3)) 2.2 % 1.9 % 1.7 % 1.6 % 3.4 % 2.6 %
S&P/TSX growth((2)(4)) (3.8) % 2.7 % 4.0 % 3.0 % (25.6) % 5.5 %
WTI oil price((5)) (US$ per barrel) 71 75 89 84 45 55
(1) All macroeconomic factors are based on the Canadian economy
unless otherwise indicated.
(2) Growth rate is annualized.
(3) Yield on corporate BBB bonds less yield on Canadian federal
government bonds with 10-year maturity.
(4) Main stock index in Canada.
(5) The West Texas Intermediate (WTI) index is commonly used as a
benchmark for the price of oil.
The main macroeconomic factors used for the personal credit portfolio are
unemployment rate and growth in the housing price index, based on the economy
of Canada or Quebec. The main macroeconomic factors used for the business and
government credit portfolio are unemployment rate, spread on corporate BBB
bonds, S&P/TSX growth, and WTI oil price. An increase in unemployment rate
or BBB spread will generally lead to higher allowances for credit losses,
whereas an increase in the other macroeconomic factors (GDP, S&P/TSX,
housing price index, and WTI oil price) will generally lead to lower
allowances for credit losses.
Note 6 - Loans and Allowances for Credit Losses (cont.)
During the quarter ended April 30, 2025, the macroeconomic outlook
deteriorated slightly, and uncertainty remained high.
After imposing tariffs on specific products and certain countries (notably
Canada), the U.S. administration presented its reciprocal tariff plan at the
beginning of April, before announcing a 90-day pause. Escalating trade
tensions between China and the United States have led to prohibitive tariffs
between the two great powers. As a result, the U.S. is imposing tariffs on its
trading partners at an effective rate that is at levels not seen in decades.
While Canada has been somewhat spared, as products covered by the
Canada-United States-Mexico Agreement (CUSMA) are not subject to tariffs, the
situation continues to be marked by high uncertainty. The risks of escalation
and a lack of visibility are paralyzing businesses, which are placing their
investment plans on hold. The labour market is deteriorating once again.
Fortunately, inflation is under control, allowing the Bank of Canada to
continue easing its monetary policy. In the base scenario, Canada's
unemployment rate stands at 7.3% after 12 months, an increase of 0.7
percentage point. In addition to the deterioration in the labour market,
housing prices are down slightly, as economic uncertainty is dampening the
enthusiasm of potential buyers. Instead, housing prices fall 0.3% year over
year. The S&P/TSX sits at 22,831 points after one year, and the price of
oil is at US$61.
In the upside scenario, trade tensions fade and geopolitical conflicts are
resolved, lifting confidence. Inflation continues to subside, as central
bankers managed to curb it without causing significant damage to the economy.
The Canadian and U.S. governments continue to expand spending, offsetting the
effects of the restrictive monetary policies. With the labour market holding
up, consumer spending remains relatively resilient. House prices appreciate
strongly against a backdrop of respectable economic growth and an improving
labour market. After one year, the unemployment rate in this scenario is more
favourable than in the base scenario (0.8 percentage point lower). Housing
prices rise 9.7%, the S&P/TSX sits at 26,109 points after one year, and
the price of oil is at US$83.
In the downside scenario, widespread tariffs are imposed on Canada, but the
country limits retaliation so as not to generate too much inflation. The
central bank cuts interest rates sharply, but falling demand and uncertainty
translate into sharply reduced investment by businesses, which consequently
reduce staffing levels. Given budgetary constraints, governments are unable to
support households and businesses as they did during the pandemic. The
geopolitical situation continues to cause concern, with the risk of conflicts
escalating. After 12 months, economic contraction pushes unemployment to 9.6%.
House prices fall sharply (-13.9%). The S&P/TSX sits at 18,680 points
after one year, and the price of oil is at US$36.
Given the uncertainty surrounding key inputs used to measure credit losses,
the Bank has applied expert credit judgment to adjust the modelled expected
credit loss results.
Sensitivity Analysis of Allowances for Credit Losses on Non-Impaired Loans
Scenarios
The following table shows a comparison of the Bank's allowances for credit
losses on non-impaired loans (Stages 1 and 2) as at April 30, 2025 based on
the probability weightings of three scenarios with allowances for credit
losses resulting from simulations of each scenario weighted at 100%.
Allowances for credit losses on non-impaired loans
Balance as at April 30, 2025 1,483
Simulations
100% upside scenario 1,068
100% base scenario 1,215
100% downside scenario 1,861
Finance leases
As part of the CWB acquisition, the Bank acquired finance leases for a fair
value amount of $3,625 million. As at April 30, 2025, the amount recognized
as net investment in finance leases included in business and government loans
was $3,609 million and the related allowance for expected credit losses
recorded was $48 million.
The following table sets out a reconciliation of maturity analysis of
undiscounted lease payments and net investment in finance leases.
As at April 30, 2025
1 year or less 1,325
Over 1 year to 2 years 1,050
Over 2 years to 3 years 762
Over 3 years to 4 years 471
Over 4 years to 5 years 220
Over 5 years 52
Undiscounted lease payments 3,880
Unearned finance income (271)
Net investment in finance leases((1)) 3,609
(1) Interest income totalled $42 million for the six-month period
ended April 30, 2025.
Note 7 - Other Assets
As at April 30, 2025 As at October 31, 2024
Receivables, prepaid expenses and other items 3,226 3,579
Interest and dividends receivable 1,707 1,742
Due from clients, dealers and brokers 955 1,302
Defined benefit asset 638 487
Deferred tax assets 968 828
Current tax assets 766 669
Reinsurance contract assets 23 22
Insurance contract assets 43 41
Investments in associates and joint ventures 43 40
Commodities((1)) 469 573
8,838 9,283
(1) Commodities are recorded at fair value based on quoted prices
in active markets and are classified in Level 1 of the fair value measurement
hierarchy.
Note 8 - Deposits
As at April 30, 2025 As at October 31, 2024
On demand((1)) After notice((2)) Fixed term((3)) Total Total
Personal 7,113 52,300 62,595 122,008 95,181
Business and government((4)) 65,302 32,613 160,174 258,089 232,730
Deposit-taking institutions 2,068 395 5,414 7,877 5,634
74,483 85,308 228,183 387,974 333,545
(1) Demand deposits are deposits for which the Bank does not have
the right to require a notice of withdrawal and consist essentially of
deposits in chequing accounts.
(2) Notice deposits are deposits for which the Bank may legally
require a notice of withdrawal and consist mainly of deposits in savings
accounts.
(3) Fixed-term deposits are deposits that can be withdrawn by the
holder on a specified date and include term deposits, guaranteed investment
certificates, savings accounts and plans, covered bonds, and other similar
instruments.
(4) As at October 31, 2024, business and government deposits
included subscription receipts issued under the agreement to acquire CWB for
$1.0 billion. For additional information, see Notes 10 and 19.
The Deposits - Business and government item includes, among other items,
covered bonds for which the balance was $9.8 billion as at April 30, 2025
($11.4 billion as at October 31, 2024). During the six-month period ended
April 30, 2025, an amount of US$255 million and an amount of 1.0 billion
euros in covered bonds came to maturity (750 million euros in covered bonds
came to maturity during the six-month period ended April 30, 2024). For
additional information on covered bonds, see Note 29 to the audited annual
consolidated financial statements for the year ended October 31, 2024.
In addition, as at April 30, 2025, the Deposits - Business and government
item also includes deposits of $23.4 billion ($23.5 billion as at
October 31, 2024) that are subject to the bank bail-in conversion
regulations issued by the Government of Canada. These regulations provide
certain powers to the Canada Deposit Insurance Corporation (CDIC), notably the
power to convert certain eligible Bank shares and liabilities into common
shares should the Bank become non-viable.
Note 9 - Other Liabilities
As at April 30, 2025 As at October 31, 2024
Accounts payable and accrued expenses 3,174 3,433
Subsidiaries' debts to third parties 381 236
Interest and dividends payable 2,594 2,290
Lease liabilities 620 472
Due to clients, dealers and brokers 1,067 853
Defined benefit liability 105 103
Allowances for credit losses - Off-balance-sheet commitments (Note 6) 253 214
Deferred tax liabilities 260 69
Current tax liabilities 243 123
Insurance contract liabilities 26 28
Other items((1)(2)(3)) 1,416 865
10,139 8,686
(1) As at April 30, 2025, Other items included provisions for
litigation of $9 million ($10 million as at October 31, 2024).
(2) As at April 30, 2025, Other items included provisions for
onerous contracts of $13 million ($18 million as at October 31, 2024).
(3) As at April 30, 2025, Other items included the financial
liability resulting from put options written to non-controlling interests of
Flinks Technology Inc. (Flinks) for an amount of $6 million ($5 million as
at October 31, 2024).
Note 10 - Subscription Receipts
In connection with the CWB transaction, the Bank had offered an aggregate of
9,262,500 subscription receipts at a price of $112.30 per subscription receipt
pursuant to a public offering (the Public Offering) and concurrent private
placement (the Concurrent Private Placement) for a total amount of $1.0
billion.
Pursuant to the Public Offering, on June 17, 2024, the Bank had issued and
sold 4,453,000 subscription receipts at a price of $112.30 for total gross
proceeds of approximately $500 million. The Public Offering had been
underwritten on a bought-deal basis by a syndicate of underwriters (the
Underwriters). On July 17, 2024, the Bank had issued and sold 178,250
additional subscription receipts pursuant to the partial exercise of the
Underwriters' over-allotment option. Pursuant to the Concurrent Private
Placement, on June 17, 2024, the Bank had issued and sold 4,453,000
subscription receipts at a price of $112.30 to an affiliate of Caisse de
dépôt et placement du Québec (CDPQ) for total gross proceeds of
approximately $500 million. On July 17, 2024, the Bank had issued and sold
178,250 additional subscription receipts to an affiliate of CDPQ pursuant to
CDPQ's option to purchase additional subscription receipts to maintain its
pro-rata ownership.
Each subscription receipt entitled the holder thereof to receive automatically
upon closing of the CWB transaction, without any action on the part of the
holder and without payment of additional consideration, (i) one common share
of National Bank, and (ii) a cash payment equal to the amount per common share
of any cash dividends declared by the Bank and for which the record date fell
within the period from June 17, 2024 up to (but excluding) the last day the
subscription receipts were outstanding (less applicable withholding taxes, if
any). Had the transaction failed, the subscription receipt holders would have
had the right to the reimbursement of the full amount, including interest
earned.
On February 3, 2025, the closing date of the transaction, the common shares of
the Bank issuable pursuant to the subscription receipts were automatically
issued through CDS Clearing and Depository Services Inc. in accordance with
the terms of the subscription receipts. In addition, pursuant to the terms of
the subscription receipts, holders of subscription receipts were also entitled
to receive a cash amount for each subscription receipt equivalent to the
dividend per common share payable by National Bank to holders of common shares
of record on June 24, 2024, September 30, 2024, and December 30, 2024, with
payment occurring on August 1, 2024, November 1, 2024, and February 1, 2025,
respectively. The number of common shares of National Bank issued pursuant to
the automatic exchange of the subscription receipts was 9,262,500.
Note 11 - Subordinated Debt
On January 13, 2025, the Bank issued medium-term notes for a total amount of
$1.0 billion bearing interest at 4.260% and maturing on February 15, 2035.
The interest on these notes will be payable semi-annually at a rate of 4.260%
per annum until February 15, 2030 and, thereafter, will be payable quarterly
at a floating rate equal to Daily Compounded CORRA (Canadian Overnight Repo
Rate Average) plus 1.56%. With the prior approval of the Office of the
Superintendent of Financial Institutions (OSFI), the Bank may, at its option,
redeem these notes as of February 15, 2030, in whole or in part, at their
nominal value plus accrued and unpaid interest. Given that the medium-term
notes satisfy the non-viability contingent capital (NVCC) requirements, they
qualify for the purposes of calculating regulatory capital under Basel III.
As part of the CWB acquisition, the Bank acquired subordinated debentures of
$525 million, detailed below. The acquisition-date fair value was $554
million. For additional information, see Note 19 to these Consolidated
Financial Statements.
The Bank acquired subordinated debentures in an amount of $125 million bearing
interest at 4.840% and maturing on June 29, 2030. The interest on these
debentures will be payable semi-annually at a rate of 4.840% per annum until
June 29, 2025 and, thereafter, will be payable quarterly at a floating rate
equal to Daily Compounded CORRA plus 4.102%. With the prior approval of OSFI,
the Bank may, at its option, redeem these debentures as of June 29, 2025, in
whole or in part, at their nominal value plus accrued and unpaid interest. On
May 7, 2025, the Bank provided notice to the holders of its intention to
redeem on June 29, 2025, these debentures, at a redemption price equal to the
outstanding principal amount and all accrued and unpaid interest.
The Bank acquired subordinated debentures in an amount of $150 million bearing
interest at 5.937% and maturing on December 22, 2032. The interest on these
debentures will be payable semi-annually at a rate of 5.937% per annum until
December 22, 2027 and, thereafter, will be payable quarterly at a floating
rate equal to Daily Compounded CORRA plus 2.91%. With the prior approval of
OSFI, the Bank may, at its option, redeem these debentures as of December 22,
2027, in whole or in part, at their nominal value plus accrued and unpaid
interest.
The Bank acquired subordinated debentures in an amount of $250 million bearing
interest at 5.949% and maturing on January 29, 2034. The interest on these
debentures will be payable semi-annually at a rate of 5.949% per annum until
January 29, 2029 and, thereafter, will be payable quarterly at a floating rate
equal to Daily Compounded CORRA plus 2.73%. With the prior approval of OSFI,
the Bank may, at its option, redeem these debentures as of January 29, 2029,
in whole or in part, at their nominal value plus accrued and unpaid interest.
Given that the subordinated debentures satisfy the NVCC requirements, they
qualify for the purposes of calculating regulatory capital under Basel III.
Note 12 - Share Capital and Other Equity Instruments
Shares and Other Equity Instruments Outstanding
As at April 30, 2025 As at October 31, 2024
Number Shares Number Shares
of shares or LRCN of shares or LRCN
or LRCN((1)) $ or LRCN $
First Preferred Shares
Series 30 14,000,000 350 14,000,000 350
Series 32 − − 12,000,000 300
Series 38 16,000,000 400 16,000,000 400
Series 40 12,000,000 300 12,000,000 300
Series 42 12,000,000 300 12,000,000 300
Series 47((2)) 5,000,000 128 − −
Series 49((2)) 5,000,000 136 − −
64,000,000 1,614 66,000,000 1,650
Other equity instruments
LRCN - Series 1 500,000 500 500,000 500
LRCN - Series 2 500,000 500 500,000 500
LRCN - Series 3 500,000 500 500,000 500
1,500,000 1,500 1,500,000 1,500
Preferred shares and other equity instruments 65,500,000 3,114 67,500,000 3,150
Common shares at beginning of fiscal year 340,743,876 3,463 338,284,629 3,294
Issued pursuant to the Stock Option Plan 460,890 34 2,297,601 146
Issued as part of the CWB acquisition((2))
Exchange of common shares 41,010,378 5,290 − −
Automatic exchange of subscription receipts 9,262,500 1,040 − −
Impact of shares purchased or sold for trading((3)) (155,940) (22) 161,646 23
Common shares at end of period 391,321,704 9,805 340,743,876 3,463
(1) Limited Recourse Capital Notes (LRCN).
(2) For additional information, see Note 19 to these Consolidated
Financial Statements.
(3) As at April 30, 2025, a total of 32,431 shares were sold
short for trading, representing $4 million (188,371 shares were sold short for
trading, representing an amount of $26 million as at October 31, 2024).
Dividends Declared and Distributions on Other Equity Instruments
Six months ended April 30
2025 2024
Dividends Dividends Dividends Dividends
or interest per share or interest per share
$ $
First Preferred Shares
Series 30 11 0.7739 7 0.5031
Series 32 3 0.2399 6 0.4799
Series 38 14 0.8784 14 0.8784
Series 40 9 0.7273 9 0.7273
Series 42 10 0.8820 10 0.8820
Series 47 2 0.3982 − −
Series 49 2 0.4782 − −
51 46
Other equity instruments
LRCN - Series 1((1)) 10 10
LRCN - Series 2((2)) 10 10
LRCN - Series 3((3)) 19 19
LRCN - Series 1 and 2 of CWB((4)) 3 −
42 39
Preferred shares and other equity instruments 93 85
Common shares 837 2.2800 720 2.1200
930 805
(1) The LRCN - Series 1 bear interest at a fixed rate of 4.30% per
annum.
(2) The LRCN - Series 2 bear interest at a fixed rate of 4.05% per
annum.
(3) The LRCN - Series 3 bear interest at a fixed rate of 7.50% per
annum.
(4) For additional information, see Note 19 to these Consolidated
Financial Statements.
Redemption of Preferred Shares
On February 17, 2025, the first business day after the February 15, 2025 set
redemption date, the Bank redeemed all of the issued and outstanding
Non-Cumulative 5-Year Rate Reset Series 32 First Preferred Shares. Pursuant to
the share conditions, the redemption price was $25.00 per share plus the
periodic dividends declared and unpaid. The Bank redeemed 12,000,000 Series 32
preferred shares for a total amount of $300 million, which reduced Preferred
share capital.
Repurchase of Common Shares
On December 12, 2023, the Bank had begun 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 ended on December 11, 2024. On December 12, 2022, the Bank had begun 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 ended December 11, 2023. Any repurchase through the
Toronto Stock Exchange will be done at market prices. The common shares may
also be repurchased through other means authorized by the Toronto Stock
Exchange and applicable regulations, including private agreements or share
repurchase programs under issuer bid exemption orders issued by the securities
regulators. A private purchase made under an exemption order issued by a
securities regulator will be done at a discount to the prevailing market
price. The amounts that are paid above the average book value of the common
shares are charged to Retained earnings. During the six-month periods ended
April 30, 2025 and 2024, the Bank did not repurchase any common shares.
Note 13 - Capital Disclosure
The Bank and all other major Canadian banks have to maintain the following
minimum capital ratios established by OSFI: a CET1 capital ratio of at least
11.5%, a Tier 1 capital ratio of at least 13.0%, and a Total capital ratio of
at least 15.0%. All of these ratios include a capital conservation buffer of
2.5% established by the Basel Committee on Banking Supervision (BCBS) and
OSFI, a 1.0% surcharge applicable solely to Domestic Systemically Important
Banks (D-SIBs), and a 3.5% domestic stability buffer (DSB) established by
OSFI. The DSB, which can vary from 0% to 4.0% of risk-weighted assets (RWA),
consists exclusively of CET1 capital. A D‑SIB that fails to meet this buffer
requirement will not be subject to automatic constraints to reduce capital
distributions but must provide a remediation plan to OSFI. The Bank also has
to meet the requirements of the capital output floor, under which its total
RWA must not be lower than 72.5% of the total RWA as calculated under the
Basel III Standardized Approaches. OSFI had planned a phase-in of the floor
factor, starting at 65.0% in the second quarter of 2023, and rising to reach
72.5% in fiscal 2027. On February 12, 2025, OSFI deferred any additional
increases until further notice. As a result, the floor factor, currently set
at 67.5%, will remain at this level for an undetermined period. If the capital
requirement is less than the capital output floor requirement after applying
the floor factor, the difference is added to the total RWA. Lastly, OSFI
requires D-SIBs to maintain 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.
OSFI also requires D-SIBs to maintain a risk-based total loss-absorbing
capacity (TLAC) ratio of at least 25.0% (including the DSB) of RWA and a TLAC
leverage ratio of at least 7.25%. The purpose of TLAC is to ensure that a
D-SIB has sufficient loss-absorbing capacity to support its internal
recapitalization in the unlikely event it becomes non-viable.
During the quarter and the six-month period ended April 30, 2025, the Bank
was compliant with all of OSFI's regulatory capital, leverage, and TLAC
requirements.
Regulatory Capital((1)), Leverage Ratio((1)) and TLAC((2))
As at April 30, 2025 As at October 31, 2024
Capital
CET1 24,514 19,321
Tier 1 27,603 22,470
Total capital 30,930 24,001
Risk-weighted assets 182,772 140,975
Total exposure 585,319 511,160
Capital ratios
CET1 13.4 % 13.7 %
Tier 1 15.1 % 15.9 %
Total 16.9 % 17.0 %
Leverage ratio 4.7 % 4.4 %
Available TLAC 51,508 44,040
TLAC ratio 28.2 % 31.2 %
TLAC leverage ratio 8.8 % 8.6 %
(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.
Note 14 - Share-Based Payments
Stock Option Plan
During the quarters ended April 30, 2025 and 2024, the Bank did not award any
stock options. During the six-month period ended April 30, 2025, the Bank
awarded 1,004,492 stock options (1,222,652 stock options during the six-month
period ended April 30, 2024) with an average fair value of $23.26 per option
($13.74 in 2024).
Replacement Options
In connection with the CWB acquisition, during the quarter ended April 30,
2025, the Bank exchanged outstanding options held by employees of CWB for
719,886 replacement options, with a weighted average fair value of $53.32
granting holders the right to purchase common shares of the Bank on
substantially similar terms and conditions as were applicable under the CWB
Stock Option Plan prior to the exchange, including vesting schedule, term to
expiry, termination of employment and change of control provisions. The
replacement options vest at the end of a three-year period and expire seven
years from the grant date attached to the CWB options prior to the exchange.
The exercise price of the replacement options was adjusted to reflect the
price difference between the CWB common shares and the Bank's common shares,
and the number of replacement options exchanged for CWB options was adjusted,
in conjunction with the exercise price, to maintain the same aggregate
intrinsic value immediately following the exchange as immediately prior to the
exchange. The adjustment of the exercise price and the number of replacement
options issued was based on the acquisition's share exchange ratio of 0.450.
See Note 19 for additional information on the CWB acquisition.
As at April 30, 2025, there were 11,671,264 stock options outstanding
(10,443,059 stock options as at October 31, 2024).
The average fair value of the options awarded, excluding replacement options
issued in connection with the CWB acquisition, was estimated on the award date
using the Black-Scholes model as well as the following accounting assumptions.
Six months ended April 30
2025 2024
Risk-free interest rate 2.63% 3.61%
Expected life of options 7 years 7 years
Expected volatility 24.43% 22.29%
Expected dividend yield 3.54% 4.62%
The average fair value of replacement options issued in connection with the
CWB acquisition, was estimated on the award date using the Black-Scholes model
as well as the following assumptions, which are presented on a weighted
average basis.
Six months ended April 30
2025
Risk-free interest rate 2.54%
Expected life of options 4-7 years
Expected volatility 22.00%
Expected dividend yield 3.59%
During the quarter ended April 30, 2025, a $6 million compensation expense
was recorded for this plan ($5 million for the quarter ended
April 30, 2024). During the six-month period ended April 30, 2025, a
$11 million compensation expense was recorded for this plan ($9 million for
the six-month period ended April 30, 2024).
Replacement Restricted Stock Units (RSUs)
In connection with the CWB acquisition, during the quarter ended April 30,
2025, the Bank exchanged outstanding RSUs and performance stock units (PSUs)
held by employees of CWB for 501,764 replacement RSUs at a price of $128.99,
granting holders the right to a cash settlement based on the value of the
Bank's common shares. The replacement RSUs retained the same terms as were
applicable under the CWB RSU and PSU Plans, including vesting schedule, term
to expiry, termination of employment and change of control provisions, with
the exception of the performance condition previously attached to the CWB PSU
Plan, which was removed immediately prior to the exchange. The replacement
units issued in exchange for the CWB RSUs vest on each anniversary of the
grant in equal instalments over a period of three years, and the replacement
units issued in exchange for the CWB PSUs vest at the end of a three-year
period. Upon the exchange, the value of the cash settlement was substituted by
the value of the Bank's common shares. To reflect the difference in the value
of the cash-settlement between the replacement units and the CWB units, the
number of replacement units was adjusted to maintain the same aggregate
cash-settlement value immediately following the exchange as immediately prior
to the exchange. The number of replacement units was based on the
acquisition's share exchange ratio of 0.450.
Note 15 - Employee Benefits - Pension Plans and Other Post-Employment Benefit
Plans
The Bank offers pension plans that have a defined benefit component and a
defined contribution component. The Bank also offers other post-employment
benefit plans to eligible retirees. The cost associated with these plans,
including the remeasurements recognized in Other comprehensive income, is
presented in the following table.
Cost for Pension Plans and Other Post-Employment Benefit Plans
Quarter ended April 30
Pension plans Other post-employment benefit plans
2025 2024 2025 2024
Current service cost 27 21 − −
Interest expense (income), net (5) (5) 1 2
Administrative costs 1 1
Expense of the defined benefit component 23 17 1 2
Expense of the defined contribution component 9 5
Expense recognized in Net income 32 22 1 2
Remeasurements((1))
Actuarial (gains) losses on the defined benefit obligation (218) (233) (3) (3)
Return on plan assets((2)) 90 270
Remeasurements recognized in Other comprehensive income (128) 37 (3) (3)
(96) 59 (2) (1)
Six months ended April 30
Pension plans Other post-employment benefit plans
2025 2024 2025 2024
Current service cost 54 41 − −
Interest expense (income), net (10) (9) 2 3
Administrative costs 2 2
Expense of the defined benefit component 46 34 2 3
Expense of the defined contribution component 16 9
Expense recognized in Net income 62 43 2 3
Remeasurements((1))
Actuarial (gains) losses on the defined benefit obligation (106) 271 (1) 5
Return on plan assets((2)) (29) (253)
Remeasurements recognized in Other comprehensive income (135) 18 (1) 5
(73) 61 1 8
(1) Changes related to the discount rate and to the return on
plan assets are reviewed and updated on a quarterly basis. All other
assumptions are updated annually.
(2) Excludes interest income.
Note 16 - Income Taxes
Notice of Assessment
In April 2025, the Bank was reassessed by the Canada Revenue Agency (CRA) for
additional income tax and interest of approximately $125 million (including
estimated provincial tax and interest) in respect of certain Canadian
dividends received by the Bank during the 2020 taxation year.
In prior fiscal years, the Bank had been reassessed for additional income tax
and interest of approximately $1,075 million (including provincial tax and
interest) in respect of certain Canadian dividends received by the Bank during
the 2012-2019 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 2020 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
April 30, 2025.
Pillar 2 Rules
On June 20, 2024, Bill C-69 - An Act to implement certain provisions of the
budget tabled in Parliament on April 16, 2024 received royal assent. The bill
included the Pillar 2 rules (global minimum tax) published by the Organisation
for Economic Co-operation and Development (OECD) that are applicable to fiscal
years beginning on or after December 31, 2023 (November 1, 2024, for the
Bank). To date, the Pillar 2 rules have been included in a bill or enacted in
certain jurisdictions where the Bank operates. For the quarter and the
six-month period ended April 30, 2025, the Bank estimates that the application
of the Pillar 2 rules represents an increase in the effective tax rate of
1.9%. For the quarter ended April 30, 2025, the Bank continues to apply the
exception to the recognition and disclosure of information about deferred tax
assets and liabilities arising from the Pillar 2 rules in the jurisdictions
where they have been included in a bill or enacted.
Note 17 - Earnings Per Share
Diluted earnings per share is calculated by dividing net income attributable
to common shareholders by the weighted average number of common shares
outstanding after taking into account the dilution effect of stock options
using the treasury stock method and any gain (loss) on the redemption of
preferred shares.
Quarter ended April 30 Six months ended April 30
2025 2024 2025 2024
Basic earnings per share
Net income attributable to the Bank's shareholders and holders of other equity 896 907 1,893 1,829
instruments
Dividends on preferred shares and distributions on other equity instruments 43 37 82 74
Net income attributable to common shareholders 853 870 1,811 1,755
Weighted average basic number of common shares outstanding (thousands) 390,124 339,558 365,022 339,111
Basic earnings per share (dollars) 2.19 2.56 4.96 5.18
Diluted earnings per share
Net income attributable to common shareholders 853 870 1,811 1,755
Weighted average basic number of common shares outstanding (thousands) 390,124 339,558 365,022 339,111
Adjustment to average number of common shares (thousands)
Stock options((1)) 3,754 3,223 4,045 2,792
Weighted average diluted number of common shares outstanding (thousands) 393,878 342,781 369,067 341,903
Diluted earnings per share (dollars) 2.17 2.54 4.91 5.13
(1) For the quarter April 30, 2025, the calculation of diluted
earnings per share excluded an average number of 999,490 options outstanding
with a weighted average exercise price of $132.75 given that the exercise
price of these options was greater than the average price of the Bank's common
shares. For the six-month period ended April 30, 2025, the calculation of
diluted earnings per share excluded an average number of 791,144 options
outstanding with a weighted average exercise price of $132.75 given that the
exercise price of these options was greater than the average price of the
Bank's common shares. For the quarter and six-month period ended April 30,
2024, as the exercise price of the options was lower than the average price of
the Bank's common shares, no options were excluded from the diluted earnings
per share calculation.
Note 18 - Segment Disclosures
The Bank carries out its activities in four business segments, which are
defined below. For presentation purposes, other activities are grouped in the
Other heading. Each reportable segment is distinguished by services offered,
type of clientele, and marketing strategy.
The presentation of segment disclosures is consistent with the presentation
adopted by the Bank for the fiscal year that began on November 1, 2024. It
reflects the discontinuation of taxable equivalent basis reporting for income
and income tax expense. Using the taxable equivalent basis method is less
relevant since the introduction of the Pillar 2 rules (global minimum tax)
during the first quarter of 2025 and Bill C-59 in relation to the taxation of
certain Canadian dividends during fiscal 2024. This change has no impact on
net income previously disclosed. Data for the 2024 periods were adjusted to
reflect this change.
Personal and Commercial
The Personal and Commercial segment encompasses the banking, financing, and
investing services offered to individuals, advisors, and businesses as well as
insurance operations.
Wealth Management
The Wealth Management segment comprises investment solutions, trust services,
banking services, lending services, and other wealth management solutions
offered through internal and third-party distribution networks.
Financial Markets
The Financial Markets segment encompasses corporate banking and investment
banking and financial solutions for large and mid-size corporations, public
sector organizations, and institutional investors.
U.S. Specialty Finance and International (USSF&I)
The USSF&I segment encompasses the specialty finance expertise provided by
the Credigy subsidiary; the activities of the ABA Bank subsidiary, which
offers financial products and services to individuals and businesses in
Cambodia; and the activities of targeted investments in certain emerging
markets.
Other
This heading encompasses treasury activities; liquidity management; Bank
funding; asset/liability management activities; the activities of the Flinks
subsidiary, a fintech company specialized in financial data aggregation and
distribution; certain specified items; and the unallocated portion of
corporate units.
Quarter ended April 30((1))
Personal and Wealth Financial USSF&I Other Total
Commercial Management Markets
2025 2024 2025 2024 2025 2024 2025 2024 2025 2024 2025 2024
Net interest income 1,146 870 230 203 (505) (671) 356 318 (22) (85) 1,205 635
Non-interest income 270 261 561 480 1,606 1,352 34 32 (26) (10) 2,445 2,115
Total revenues 1,416 1,131 791 683 1,101 681 390 350 (48) (95) 3,650 2,750
Non-interest expenses((2)(3)) 804 612 476 400 403 312 117 108 142 40 1,942 1,472
Income before provisions for credit 612 519 315 283 698 369 273 242 (190) (135) 1,708 1,278
losses and income taxes
Provisions for credit losses((4)) 426 89 (1) − 64 11 59 37 (3) 1 545 138
Income before income taxes (recovery) 186 430 316 283 634 358 214 205 (187) (136) 1,163 1,140
Income taxes (recovery) 54 119 84 78 133 36 45 42 (49) (41) 267 234
Net income 132 311 232 205 501 322 169 163 (138) (95) 896 906
Non-controlling interests − − − − − − − − − (1) − (1)
Net income attributable
to the Bank's shareholders and holders of other equity instruments 132 311 232 205 501 322 169 163 (138) (94) 896 907
Average assets((5)) 208,658 156,736 10,754 8,963 224,314 194,158 33,101 27,402 74,605 67,777 551,432 455,036
Total assets 210,502 159,359 10,968 9,369 213,679 183,123 31,613 28,156 69,432 61,683 536,194 441,690
Six months ended April 30((1))
Personal and Wealth Financial USSF&I Other Total
Commercial Management Markets
2025 2024 2025 2024 2025 2024 2025 2024 2025 2024 2025 2024
Net interest income((6)) 2,090 1,740 457 401 (1,014) (1,224) 726 619 (82) (150) 2,177 1,386
Non-interest income((7)) 530 545 1,110 942 3,022 2,552 69 57 (75) (22) 4,656 4,074
Total revenues 2,620 2,285 1,567 1,343 2,008 1,328 795 676 (157) (172) 6,833 5,460
Non-interest expenses((2)(3)) 1,445 1,227 917 790 770 625 240 208 216 71 3,588 2,921
Income before provisions for credit 1,175 1,058 650 553 1,238 703 555 468 (373) (243) 3,245 2,539
losses and income taxes
Provisions for credit losses((4)) 588 160 1 − 100 28 110 73 − (3) 799 258
Income before income taxes (recovery) 587 898 649 553 1,138 675 445 395 (373) (240) 2,446 2,281
Income taxes (recovery) 165 248 175 152 220 45 93 82 (100) (74) 553 453
Net income 422 650 474 401 918 630 352 313 (273) (166) 1,893 1,828
Non-controlling interests − − − − − − − − − (1) − (1)
Net income attributable
to the Bank's shareholders and 422 650 474 401 918 630 352 313 (273) (165) 1,893 1,829
holders of other equity instruments
Average assets((5)) 186,905 155,874 10,681 8,834 217,949 192,280 32,134 26,706 71,627 65,089 519,296 448,783
Total assets 210,502 159,359 10,968 9,369 213,679 183,123 31,613 28,156 69,432 61,683 536,194 441,690
(1) Certain comparative amounts have been adjusted to reflect the
discontinuation of taxable equivalent basis reporting for revenues and income
taxes.
(2) During the quarter ended April 30, 2025, the Bank recorded
acquisition and integration charges of $118 million ($86 million net of income
taxes) in the Personal and Commercial segment ($1 million), in the Wealth
Management segment ($3 million) and in the Other heading ($114 million)
related to the CWB acquisition. For the six-month period ended April 30, 2025,
these charges were $144 million ($105 million, net of income taxes).
(3) During the quarter and six-month period ended April 30, 2025
the Bank recorded an amount of $24 million ($18 million, net of income taxes)
in the Personal and Commercial segment ($23 million) and in the Wealth
Management segment ($1 million), to reflect the amortization of intangible
assets related to the CWB acquisition.
(4) During the quarter and six-month period ended April 30, 2025,
the Bank recorded an amount of $230 million ($166 million net of income
taxes) in the Personal and Commercial segment to reflect the initial
provisions for credit losses on non-impaired loans acquired from CWB.
(5) Represents the average of the daily balances for the period,
which is also the basis on which segment assets are reported in the business
segments.
(6) During the six-month period ended April 30, 2025, the Bank
recorded an amount of $28 million ($20 million net of income taxes) in the
Other heading 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 8 and 10 to these Consolidated Financial
Statements).
(7) During the six-month period ended April 30, 2025, the Bank
recorded a gain of $4 million ($3 million net of income taxes) upon the
remeasurement at fair value of the interest already held in CWB as at January
31, 2025. Also, during the six-month period ended April 30, 2025, the Bank
recorded a mark-to-market loss of $23 million ($17 million net of income
taxes) on interest rate swaps used to manage the fair value changes of CWB's
assets and liabilities that resulted in volatility of goodwill and capital on
closing of the transaction. All these items were recorded in the Other
heading.
Note 19 - Acquisition
Canadian Western Bank (CWB) Acquisition
On February 3, 2025, the Bank completed the acquisition of CWB, a diversified
financial services institution based in Edmonton, Alberta, in which the Bank
had already been holding a 5.9% equity interest. 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 total consideration transferred of $6.8 billion included $5.3 billion for
100% of the common shares of CWB acquired by way of a share exchange at an
exchange ratio of 0.450 of a common share of the National Bank for each CWB
common share, other than those held by the National Bank, $1.4 billion for
the settlement of pre-existing relationships and $0.1 billion for the issuance
of replacement share-based payment award. The fair value of the Bank's common
shares issued was determined on the basis of the share price on the Toronto
Stock Exchange (TSX) at closing on January 31, 2025 being a price of $128.99
per share. At acquisition date, the Bank obtained a 100% interest in the CWB
voting shares and the 5.9% previously held interest was remeasured to its fair
value of $0.3 billion. The non-controlling interest in CWB recognized at
acquisition date was measured at a fair value of $0.6 billion and represents
CWB's preferred shares and Limited Recourse Capital Notes (LRCN) outstanding
on that date. Total purchase consideration amounted to $7.7 billion.
Based on the estimated fair values, the preliminary purchase price allocation
assigns $45.4 billion to assets, including goodwill, and $37.7 billion to
liabilities at acquisition date. The estimated goodwill of $1.6 billion
reflects the expected expense synergies from our Personal and Commercial and
Wealth Management banking services operations, expected funding synergies, and
the expected growth from the product and service platform at a national scale.
Goodwill is not deductible for tax purposes.
The following table presents the estimated acquisition-date fair values of the
assets acquired and liabilities assumed and consideration transferred. During
the measurement period, which can last up to 12 months from the acquisition
date, the estimated fair values of the assets acquired and liabilities assumed
may be retroactively adjusted to reflect new information obtained about facts
and circumstances that existed as at the acquisition date.
As at February 3, 2025
Assets
Cash and deposits with financial institutions 148
Securities 4,481
Loans((1)) 37,818
Derivative financial instruments 127
Premises and equipment 225
Goodwill 1,560
Intangible assets((2)) 680
Other assets((3)) 368
45,407
Liabilities
Deposits((4)) 33,328
Obligations related to securities sold under repurchase agreements and 16
securities loaned
Derivative financial instruments 40
Liabilities related to transferred receivables 2,570
Other liabilities((5)) 1,224
Subordinated debt 554
37,732
Total identifiable net assets acquired and goodwill 7,675
Consideration transferred
Equity issued 5,290
Settlement of pre-existing relationships 1,400
Issuance of replacement share-based payment awards 63
6,753
Previously held interest 329
Non-controlling interest 593
Purchase consideration 7,675
(1) Includes $10,021 million of residential mortgage loans, $476
million of personal loans, $36 million of credit card receivables and $27,285
million of business and government loans. The fair value of loans reflects
estimates of incurred and expected future credit losses as at the acquisition
date and interest rate premiums or discounts relative to prevailing interest
rates.
(2) Includes $605 million of core deposit intangibles and $75
million of customer relationships, which are amortized on a straight-line
basis over 7 years.
(3) Includes interest receivable, derivative collateral
receivable, receivables, deferred tax assets and other assets items.
(4) Includes $21,198 million in personal deposits and $12,130
million in business and government deposits.
(5) Includes accounts payable and accrued expenses, interest
payable, lease liabilities and other liabilities items.
During the six-month period ended April 30, 2025, the remeasurement at fair
value of the previously held interest in CWB generated a gain of $4 million
which was reported in the Non‑interest income - Other item of the
Consolidated Statement of Income in the Other heading of segment disclosures.
For the six‑month period ended April 30, 2025, the acquisition and
integration costs of $144 million are included in the Non-Interest expenses in
the Consolidated Statement of Income ($118 million for the quarter ended April
30, 2025). The financial results of CWB have been consolidated in the Bank's
financial statements as of February 3, 2025 and have been recorded in the
Personal and Commercial, Wealth Management and Financial Markets segments and
in the Other heading of segment disclosures. Since acquisition date, CWB
contributed approximately $298 million to the Bank's total revenues and a net
loss of approximately $147 million to the Bank's total net income. If the
Bank had completed the acquisition on November 1, 2024, the Bank would have
reported total revenues of approximately $7,137 million and net income of
approximately $1,975 million for the six-month period ended April 30, 2025.
Issuance of Common Shares
On February 3, 2025, the Bank issued a total of 50,272,878 common shares, for
an amount of $6.3 billion, which increased Common share capital by
$6.3 billion. This issuance includes 41,010,378 common shares at a price of
$128.99 per share from the share exchange and 9,262,500 common shares at a
price of $112.30 per share from the automatic exchange of subscription
receipts. For additional information on subscription receipts, see Note 10 to
the Consolidated Financial Statements.
Exchange of Preferred Shares and Redemption of Other Equity Instruments
As of February 4, 2025, certain amendments previously approved by the holders
of the outstanding first preferred shares and LRCN of CWB, which permitted the
exchange of the first preferred shares of CWB for substantially equivalent
first preferred shares of National Bank and the early redemption of the LRCN,
were implemented.
On February 20, 2025, all the issued and outstanding Series 5 and Series 9
First Preferred Shares of CWB were exchanged for substantially equivalent
Series 47 and Series 49 First Preferred Shares of National Bank, which are
non-cumulative 5-year rate‑reset bearing interest at 6.371% and 7.651%. The
Bank exchanged 10,000,000 preferred shares for a total amount of
$268 million, which reduced the Non-controlling interest by $268 million,
increased Preferred Share capital by $264 million and increased Retained
earnings by $4 million. Consent fees related to the exchange, amounting to $2
million, net of income taxes, were recorded in Retained earnings. Given the
Series 47 and Series 49 preferred shares satisfy the non-viability contingent
capital requirements, they qualify for the purposes of calculating regulatory
capital under Basel III. Also, the Bank redeemed 175,000 LRCN - Series 1 and
150,000 LRCN - Series 2 of CWB for a total amount of $335 million,
including consent fees, which reduced the Non-controlling interest by
$325 million and decreased Retained earnings by $7 million, net of income
taxes.
Information for Shareholders and Investors
Investor Relations
Financial analysts and investors who want to obtain financial information on
the Bank may contact the Investor Relations Department.
800 Saint-Jacques Street, 33(rd) Floor
Montreal, Quebec H3C 1A3
Toll-free: 1-866-517-5455
Email: investorrelations@nbc.ca
Website: nbc.ca/investorrelations
(https://www.nbc.ca/en/about-us/investors/investor-relations.html)
Media Relations
800 Saint-Jacques Street, 32(th) Floor
Montreal, Quebec H3C 1A3
Telephone: 514-394-6500
Email: pa@nbc.ca
Quarterly Report Publication Dates for Fiscal 2025
(subject to approval by the Board of Directors of the Bank)
First quarter February 26
Second quarter May 28
Third quarter August 27
Fourth quarter December 3
Disclosure of
Second Quarter 2025 Results
Conference Call
- A conference call for analysts and institutional investors will be
held on Wednesday, May 28, 2025 at 11:00 a.m. EDT.
- Access by telephone in listen-only mode: 1-800-806-5484 or
416-340-2217. The access code is 4131060#.
- A recording of the conference call can be heard until August 28,
2025 by dialing 1-800-408-3053 or 905-694-9451. The access code is 8760078#.
Webcast
- The conference call will be webcast live at
nbc.ca/investorrelations
(https://www.nbc.ca/en/about-us/investors/investor-relations.html) .
- A recording of the webcast will also be available on National
Bank's website after the call.
Financial Documents
- The Report to Shareholders (which includes the quarterly
Consolidated Financial Statements) is available at all times on National
Bank's website at nbc.ca/investorrelations
(https://www.nbc.ca/en/about-us/investors/investor-relations.html) .
- The Report to Shareholders, the Supplementary Financial Information,
the Supplementary Regulatory Capital and Pillar 3 Disclosure, and a slide
presentation will be available on the Investor Relations page of National
Bank's website on the morning of the day of the conference call.
Transfer Agent and Registrar
For information about stock transfers, address changes, dividends, lost
certificates, tax forms, and estate transfers, shareholders of record may
contact the transfer agent, Computershare Trust Company of Canada, at the
address or telephone number below.
Computershare Trust Company of Canada
Share Ownership Management
100 University Avenue, 8(th) Floor
Toronto, Ontario M5J 2Y1
Telephone: 1-888-838-1407
Fax: 1-888-453-0330
Email: service@computershare.com
Website: computershare.com (https://www.computershare.com/ca/en)
Shareholders whose shares are held by a market intermediary are asked to
contact the market intermediary concerned.
Direct Deposit Service for Dividends
Shareholders may elect to have their dividend payments deposited directly via
electronic funds transfer to their bank account at any financial institution
that is a member of the Canadian Payments Association. To do so, they must
send a written request to the transfer agent, Computershare Trust Company of
Canada.
Dividend Reinvestment and Share Purchase Plan
National Bank has a Dividend Reinvestment and Share Purchase Plan for holders
of its common and preferred shares under which they can acquire common shares
of the Bank without paying commissions or administration fees. Participants
acquire common shares through the reinvestment of cash dividends paid on the
shares they hold or through optional cash payments of at least $1 per payment,
up to a maximum of $5,000 per quarter.
For additional information, shareholders may contact National Bank's registrar
and transfer agent, Computershare Trust Company of Canada, at
1‑888‑838‑1407. To participate in the plan, National Bank's beneficial
or non-registered common shareholders must contact their financial institution
or broker.
Dividends
Dividends paid are "eligible dividends" in accordance with the Income Tax Act
(Canada).
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