REG - Nat Bank of Canada - Report to Shareholders Part 2
26/02/2025 14:45
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RNS Number : 5767Y National Bank of Canada 26 February 2025
Regulatory Announcement (Part 2)
Q1 2025 Results
National Bank of Canada (the "Bank") announces publication of its First
Quarter 2025 Report to Shareholders. The First 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 First Quarter 2025 Report to Shareholders, please
click on the following link:
http://www.rns-pdf.londonstockexchange.com/rns/5736Y_1-2025-2-26.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/5736Y_1-2025-2-26.pdf)
Report to Shareholders First Quarter 2025
Interim Condensed Consolidated
Financial Statements
(unaudited)
Consolidated Balance Sheets 52
Consolidated Statements of Income 53
Consolidated Statements of Comprehensive Income 54
Consolidated Statements of Changes in Equity 56
Consolidated Statements of Cash Flows 57
Notes to the Interim Condensed Consolidated Financial Statements 58
Consolidated Balance Sheets
(unaudited) (millions of Canadian dollars)
As at January 31, 2025 As at October 31, 2024
Assets
Cash and deposits with financial institutions 34,608 31,549
Securities (Notes 3, 4 and 5)
At fair value through profit or loss 126,536 115,935
At fair value through other comprehensive income 16,428 14,622
At amortized cost 16,122 14,608
159,086 145,165
Securities purchased under reverse repurchase agreements
and securities borrowed 15,229 16,265
Loans (Note 6)
Residential mortgage 97,639 95,009
Personal 46,772 46,883
Credit card 2,710 2,761
Business and government 100,982 99,720
248,103 244,373
Allowances for credit losses (1,483) (1,341)
246,620 243,032
Other
Derivative financial instruments 14,164 12,309
Premises and equipment 1,917 1,868
Goodwill 1,530 1,522
Intangible assets 1,222 1,233
Other assets (Note 7) 9,457 9,283
28,290 26,215
483,833 462,226
Liabilities and equity
Deposits (Notes 4, 8 and 10) 351,095 333,545
Other
Obligations related to securities sold short 11,575 10,873
Obligations related to securities sold under repurchase agreements
and securities loaned 37,359 38,177
Derivative financial instruments 18,724 15,760
Liabilities related to transferred receivables (Note 4) 28,112 28,377
Other liabilities (Note 9) 8,307 8,686
104,077 101,873
Subordinated debt (Note 11) 2,265 1,258
Equity
Equity attributable to the Bank's shareholders and holders of
other equity instruments (Notes 12 and 14)
Preferred shares and other equity instruments 3,150 3,150
Common shares 3,485 3,463
Contributed surplus 84 85
Retained earnings 19,241 18,633
Accumulated other comprehensive income 435 219
26,395 25,550
Non-controlling interests 1 −
26,396 25,550
483,833 462,226
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 January 31
2025 ( ) 2024
Interest income
Loans 3,896 3,693
Securities at fair value through profit or loss 533 452
Securities at fair value through other comprehensive income 168 115
Securities at amortized cost 138 123
Deposits with financial institutions 314 423
5,049 4,806
Interest expense
Deposits 3,187 3,174
Liabilities related to transferred receivables 195 172
Subordinated debt 19 11
Other 676 698
4,077 4,055
Net interest income((1)) 972 751
Non-interest income
Underwriting and advisory fees 96 88
Securities brokerage commissions 57 51
Mutual fund revenues 178 150
Investment management and trust service fees 320 268
Credit fees 82 148
Card revenues 50 50
Deposit and payment service charges 72 72
Trading revenues (losses) 1,181 1,001
Gains (losses) on non-trading securities, net 27 25
Insurance revenues, net 22 21
Foreign exchange revenues, other than trading 66 48
Share in the net income of associates and joint ventures 2 2
Other 58 35
2,211 1,959
Total revenues 3,183 2,710
Non-interest expenses
Compensation and employee benefits 1,037 904
Occupancy 97 87
Technology 285 259
Communications 16 13
Professional fees 93 66
Other 118 120
1,646 1,449
Income before provisions for credit losses and income taxes 1,537 1,261
Provisions for credit losses (Note 6) 254 120
Income before income taxes 1,283 1,141
Income taxes (Note 16) 286 219
Net income 997 922
Net income attributable to
Preferred shareholders and holders of other equity instruments 39 37
Common shareholders 958 885
Bank shareholders and holders of other equity instruments 997 922
Non-controlling interests − −
997 922
Earnings per share (dollars) (Note 17)
Basic 2.81 2.61
Diluted 2.78 2.59
Dividends per common share (dollars) (Note 12) 1.14 1.06
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 January 31
2025 2024
Net income 997 922
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 453 (243)
in foreign operations
Impact of hedging net foreign currency translation gains (losses) (204) 69
249 (174)
Net change in debt securities at fair value through other comprehensive income
Net unrealized gains (losses) on debt securities at fair value through other 22 45
comprehensive income
Net (gains) losses on debt securities at fair value through other
comprehensive
income reclassified to net income (18) 3
4 48
Net change in cash flow hedges
Net gains (losses) on derivative financial instruments designated as cash flow (15) 29
hedges
Net (gains) losses on designated derivative financial instruments reclassified (22) (26)
to net income
(37) 3
Items that will not be subsequently reclassified to net income
Remeasurements of pension plans and other post-employment benefit plans 4 8
Net gains (losses) on equity securities designated at fair value through 17 22
other comprehensive income
Net fair value change attributable to the credit risk on financial liabilities
designated at fair value through profit or loss 18 (165)
39 (135)
Total other comprehensive income, net of income taxes 255 (258)
Comprehensive income 1,252 664
Comprehensive income attributable to
Bank shareholders and holders of other equity instruments 1,252 664
Non-controlling interests − −
1,252 664
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 January 31
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 (15) 6
in foreign operations
Impact of hedging net foreign currency translation gains (losses) (64) 17
(79) 23
Net change in debt securities at fair value through other comprehensive income
Net unrealized gains (losses) on debt securities at fair value through other 9 17
comprehensive income
Net (gains) losses on debt securities at fair value through other
comprehensive income
reclassified to net income (7) 1
2 18
Net change in cash flow hedges
Net gains (losses) on derivative financial instruments designated as cash flow (5) 11
hedges
Net (gains) losses on designated derivative financial instruments reclassified (9) (10)
to net income
(14) 1
Items that will not be subsequently reclassified to net income
Remeasurements of pension plans and other post-employment benefit plans 1 3
Net gains (losses) on equity securities designated at fair value through 6 10
other comprehensive income
Net fair value change attributable to the credit risk on financial liabilities
designated at fair value through profit or loss 7 (63)
14 (50)
(77) (8)
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)
Quarter ended January 31
2025 2024
Preferred shares and other equity instruments at beginning and at end 3,150 3,150
(Note 12)
Common shares at beginning (Note 12) 3,463 3,294
Issuances of common shares pursuant to the Stock Option Plan 28 51
Impact of shares purchased or sold for trading (6) 2
Common shares at end 3,485 3,347
Contributed surplus at beginning 85 68
Stock option expense (Note 14) 5 4
Stock options exercised (3) (6)
Other (3) (3)
Contributed surplus at end 84 63
Retained earnings at beginning 18,633 16,650
Net income attributable to the Bank's shareholders and holders of other equity 997 922
instruments
Dividends on preferred shares and distributions on other equity (45) (43)
instruments (Note 12)
Dividends on common shares (Note 12) (389) (359)
Remeasurements of pension plans and other post-employment benefit plans 4 8
Net gains (losses) on equity securities designated at fair value through other 17 22
comprehensive income
Net fair value change attributable to the credit risk on financial liabilities
designated at fair value through profit or loss 18 (165)
Impact of a financial liability resulting from put options written to − 1
non-controlling interests
Other 6 6
Retained earnings at end 19,241 17,042
Accumulated other comprehensive income at beginning 219 420
Net foreign currency translation adjustments 249 (174)
Net change in unrealized gains (losses) on debt securities at fair value 4 48
through other comprehensive income
Net change in gains (losses) on instruments designated as cash flow hedges (37) 3
Accumulated other comprehensive income at end 435 297
Equity attributable to the Bank's shareholders and holders of other equity 26,395 23,899
instruments
Non-controlling interests at beginning − 2
Net income attributable to non-controlling interests − −
Other 1 −
Non-controlling interests at end 1 2
Equity 26,396 23,901
Accumulated Other Comprehensive Income
As at January 31, As at January 31, 2024
2025
Accumulated other comprehensive income
Net foreign currency translation adjustments 569 133
Net unrealized gains (losses) on debt securities at fair value through other (22) 13
comprehensive income
Net gains (losses) on instruments designated as cash flow hedges (114) 149
Share in the other comprehensive income of associates and joint ventures 2 2
435 297
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)
Quarter ended January 31
2025 ( ) 2024
Cash flows from operating activities
Net income 997 922
Adjustments for
Provisions for credit losses 254 120
Amortization of premises and equipment, including right-of-use assets 63 53
Amortization of intangible assets 75 72
Deferred taxes 35 (1)
Losses (gains) on sales of non-trading securities, net (23) (25)
Share in the net income of associates and joint ventures (2) (2)
Stock option expense 5 4
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 (10,601) (5,460)
Securities purchased under reverse repurchase agreements and securities 1,036 (1,666)
borrowed
Loans and acceptances, net of securitization (4,107) (5,180)
Deposits 17,550 11,924
Obligations related to securities sold short 702 2,480
Obligations related to securities sold under repurchase agreements and (818) (1,034)
securities loaned
Derivative financial instruments, net 1,109 4,031
Securitization - Credit cards (49) −
Interest and dividends receivable and interest payable (108) 39
Current tax assets and liabilities (31) 116
Other items (1,498) (347)
4,585 6,046
Cash flows from financing activities
Issuances of common shares (including the impact of shares purchased for 19 47
trading)
Issuance of subordinated debt 1,000 −
Repayments of lease liabilities (24) (37)
Dividends paid on shares and distributions on other equity instruments (434) (401)
561 (391)
Cash flows from investing activities
Net change in investments in associates and joint ventures (2) 10
Purchases of non-trading securities (10,956) (5,122)
Maturities of non-trading securities 1,460 1,059
Sales of non-trading securities 6,683 1,531
Net change in premises and equipment, excluding right-of-use assets (65) (245)
Net change in intangible assets (64) (53)
(2,944) (2,820)
Impact of currency rate movements on cash and cash equivalents 857 (670)
Increase (decrease) in cash and cash equivalents 3,059 2,165
Cash and cash equivalents at beginning 31,549 35,234
Cash and cash equivalents at end ((1)) 34,608 37,399
Supplementary information about cash flows from operating activities
Interest paid 4,341 4,108
Interest and dividends received 5,205 4,898
Income taxes paid 68 330
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 $14.3 billion as at January 31, 2025 ($11.7 billion as at
October 31, 2024) for which there are restrictions and of which $7.6 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 58 Note 11 Subordinated Debt 76
Note 2 Future Accounting Policy Changes 58 Note 12 Share Capital and Other Equity Instruments 77
Note 3 Fair Value of Financial Instruments 59 Note 13 Capital Disclosure 78
Note 4 Financial Instruments Designated at Fair Value Through Note 14 Share-Based Payments 79
Profit or Loss 64 Note 15 Employee Benefits - Pension Plans and Other
Note 5 Securities 65 Post-Employment Benefit Plans 79
Note 6 Loans and Allowances for Credit Losses 66 Note 16 Income Taxes 80
Note 7 Other Assets 75 Note 17 Earnings Per Share 80
Note 8 Deposits 75 Note 18 Segment Disclosures 81
Note 9 Other Liabilities 75 Note 19 Events After the Consolidated Balance Sheet Date 82
Note 10 Subscription Receipts 76
Note 1 - Basis of Presentation
On February 25, 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 ended January 31, 2025.
The Bank's Consolidated Financial Statements are prepared in accordance with
International Financial Reporting Standards (IFRS® Accounting Standards), as
issued by the International Accounting Standards Board (IASB). The financial
statements also comply with section 308(4) of the Bank Act (Canada), which
states that, except as otherwise specified by the Office of the Superintendent
of Financial Institutions (Canada) (OSFI), the Consolidated Financial
Statements are to be prepared in accordance with IFRS Accounting Standards.
IFRS Accounting Standards represent Canadian generally accepted accounting
principles (GAAP). None of the OSFI accounting requirements are exceptions to
IFRS Accounting Standards.
These Consolidated Financial Statements were prepared in accordance with IAS
34 - Interim Financial Reporting and 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.
Judgment, Estimates and Assumptions
In preparing Consolidated Financial Statements in accordance with IFRS
Accounting Standards, management must exercise judgment and make estimates and
assumptions that affect the reporting date carrying amounts of assets and
liabilities, net income, and related information. 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 in accordance with IFRS
Accounting Standards and for the valuation techniques used to determine the
carrying values and fair values of assets and liabilities.
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 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.
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 January 31, 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 − − − − 34,608 34,608 34,608 34,608
Securities 126,175 361 15,865 563 16,122 16,224 159,086 159,188
Securities purchased under reverse
repurchase agreements
and securities borrowed − − − − 15,229 15,229 15,229 15,229
Loans, net of allowances 15,604 − − − 231,016 232,293 246,620 247,897
Other
Derivative financial instruments 14,164 − − − − − 14,164 14,164
Other assets 1,949 − − − 3,780 3,780 5,729 5,729
Financial liabilities
Deposits((1)) − 27,936 323,159 323,507 351,095 351,443
Other
Obligations related to securities sold short 11,575 − − − 11,575 11,575
Obligations related to securities sold under
repurchase agreements and
securities loaned − − 37,359 37,359 37,359 37,359
Derivative financial instruments 18,724 − − − 18,724 18,724
Liabilities related to transferred receivables − 10,593 17,519 17,292 28,112 27,885
Other liabilities − − 4,230 4,230 4,230 4,230
Subordinated debt − − 2,265 2,316 2,265 2,316
(1) Includes embedded derivative financial instruments.
Note 3 - Fair Value of Financial Instruments (cont.)
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 January 31,
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.
Financial Instruments Recorded at Fair Value in the Consolidated Balance Sheet
Hierarchy of Fair Value Measurements
IFRS Accounting Standards establish a fair value measurement hierarchy that
classifies the inputs used in financial instrument fair value measurement
techniques according to three levels. This fair value hierarchy requires
observable market inputs 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 January 31, 2025, $8 million in securities classified
as at fair value through profit or loss and $1 million in commitments relating
to securities sold short were transferred from Level 2 to Level 1 as a result
of changing market conditions ($3 million in securities classified as at fair
value through profit or loss during the quarter ended January 31, 2024). Also,
during the quarter ended January 31, 2025, $2 million in securities classified
as at fair value through profit or loss and $1 million in commitments relating
to securities sold short were transferred from Level 1 to Level 2 as a result
of changing market conditions ($2 million in securities classified as at fair
value through profit or loss during the quarter ended January 31, 2024).
During the quarters ended January 31, 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 January 31, 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 2,920 11,352 − 14,272
Canadian provincial and municipal governments − 7,837 − 7,837
U.S. Treasury, other U.S. agencies and other foreign governments 1,279 1,798 − 3,077
Other debt securities − 3,269 64 3,333
Equity securities 95,240 2,145 632 98,017
99,439 26,401 696 126,536
At fair value through other comprehensive income
Securities issued or guaranteed by
Canadian government 426 4,948 − 5,374
Canadian provincial and municipal governments − 3,272 − 3,272
U.S. Treasury, other U.S. agencies and other foreign governments 5,624 274 − 5,898
Other debt securities − 1,321 − 1,321
Equity securities − 253 310 563
6,050 10,068 310 16,428
Loans − 15,395 209 15,604
Other
Derivative financial instruments 1,110 12,937 117 14,164
Other assets - Other items − 1,863 86 1,949
106,599 66,664 1,418 174,681
Financial liabilities
Deposits((1)) − 32,953 − 32,953
Other
Obligations related to securities sold short 5,731 5,844 − 11,575
Derivative financial instruments 1,436 17,266 22 18,724
Liabilities related to transferred receivables − 10,593 − 10,593
7,167 66,656 22 73,845
(1) The amounts include the fair value of embedded derivative
financial instruments in deposits.
Note 3 - Fair Value of Financial Instruments (cont.)
As at October 31, 2024
Level 1 Level 2 Level 3 Total financial
assets/liabilities
at fair value
Financial assets
Securities
At fair value through profit or loss
Securities issued or guaranteed by
Canadian government 4,150 10,330 − 14,480
Canadian provincial and municipal governments − 8,473 − 8,473
U.S. Treasury, other U.S. agencies and other foreign governments 1,169 1,046 − 2,215
Other debt securities − 3,030 60 3,090
Equity securities 85,414 1,655 608 87,677
90,733 24,534 668 115,935
At fair value through other comprehensive income
Securities issued or guaranteed by
Canadian government 170 5,048 − 5,218
Canadian provincial and municipal governments − 2,900 − 2,900
U.S. Treasury, other U.S. agencies and other foreign governments 4,805 186 − 4,991
Other debt securities − 847 − 847
Equity securities − 359 307 666
4,975 9,340 307 14,622
Loans − 14,767 205 14,972
Other
Derivative financial instruments 1,139 11,073 97 12,309
Other assets - Other items − 1,976 83 2,059
96,847 61,690 1,360 159,897
Financial liabilities
Deposits((1)) − 30,434 − 30,434
Other
Obligations related to securities sold short 6,052 4,821 − 10,873
Derivative financial instruments 1,976 13,758 26 15,760
Liabilities related to transferred receivables − 11,034 − 11,034
8,028 60,047 26 68,101
(1) The amounts include the fair value of embedded derivative
financial instruments in deposits.
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 ended
January 31, 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 quarter ended January 31, 2025, there were no
significant changes in the sensitivity analyses of Level 3 financial
instruments.
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.
Quarter ended January 31, 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 − (2) 26
Total realized and unrealized gains (losses) included in
Other comprehensive income − 3 − −
Purchases 11 − − −
Sales (4) − (2) −
Issuances − − 5 −
Settlements and other − − 6 (4)
Financial instruments transferred into Level 3 − − − −
Financial instruments transferred out of Level 3 − − − 2
Fair value as at January 31, 2025 696 310 295 95
Change in unrealized gains and losses included in Net income with respect
to financial assets and financial liabilities held as at January 31, 19 − (2) 26
2025((3))
Quarter ended January 31, 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)) 6 − 9 10
Total realized and unrealized gains (losses) included in
Other comprehensive income − (6) − −
Purchases 14 − − −
Sales (8) (9) (2) −
Issuances − − 5 −
Settlements and other − − (17) 207
Financial instruments transferred into Level 3 − − − −
Financial instruments transferred out of Level 3 − − − −
Fair value as at January 31, 2024 563 363 285 202
Change in unrealized gains and losses included in Net income with respect
to financial assets and financial liabilities held as at January 31, 52 − 9 10
2024((5))
(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
$45 million.
(3) Total unrealized gains (losses) included in Non-interest income
was an unrealized gain of $43 million.
(4) Total gains (losses) included in Non-interest income was a gain of
$25 million.
(5) Total unrealized gains (losses) included in Non-interest income
was an unrealized gain of $71 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 and 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
value as at gains (losses) for gains (losses) since
January 31, 2025 the quarter ended the initial recognition
January 31, 2025 of the instrument
Financial assets designated at fair value through profit or loss
Securities 361 3 11
Financial liabilities designated at fair value through profit or loss
Deposits((1)(2)) 27,936 51 1,438
Liabilities related to transferred receivables 10,593 (94) 33
(.) 38,529 (43) 1,471
Carrying Unrealized Unrealized
value as at gains (losses) for gains (losses) since
January 31, 2024 the quarter ended the initial recognition
January 31, 2024 of the instrument
Financial assets designated at fair value through profit or loss
Securities 660 9 1
Financial liabilities designated at fair value through profit or loss
Deposits((1)(2)) 21,372 (1,841) 2,073
Liabilities related to transferred receivables 9,779 (170) 382
31,151 (2,011) 2,455
(1) For the quarter ended January 31, 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 $25 million ($228 million loss for the quarter ended January 31, 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 January 31, 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 January 31, 2025
Amortized Unrealized gross gains Unrealized gross losses Carrying
cost value((2))
Securities issued or guaranteed by
Canadian government 5,260 142 (28) 5,374
Canadian provincial and municipal governments 3,226 75 (29) 3,272
U.S. Treasury, other U.S. agencies and other foreign governments 5,915 22 (39) 5,898
Other debt securities 1,360 6 (45) 1,321
Equity securities 470 93 − 563
16,231 338 (141) 16,428
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
$4 million as at January 31, 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 quarter ended January 31, 2025, a dividend income
amount of $14 million was recognized for these investments ($17 million for
the quarter ended January 31, 2024), including a negligible amount for
investments that were sold during the quarter ended January 31, 2025 (a
negligible amount for investments that were sold during the quarter ended
January 31, 2024).
Quarter ended January 31, 2025 Quarter ended January 31, 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 3 20 23 (6) 38 32
Designated at fair value through
other comprehensive income − 40 40 − 51 51
Sales((1)) − (166) (166) (9) (37) (46)
Fair value at end 310 253 563 363 333 696
(1) The Bank disposed of private and public company equity securities
for economic reasons.
Note 5 - Securities (cont.)
Securities at Amortized Cost
As at January 31, 2025 As at October 31, 2024
Securities issued or guaranteed by
Canadian government 9,961 9,194
Canadian provincial and municipal governments 3,637 2,458
U.S. Treasury, other U.S. agencies and other foreign governments 647 687
Other debt securities 1,883 2,275
Gross carrying value 16,128 14,614
Allowances for credit losses 6 6
Carrying value 16,122 14,608
Gains (Losses) on Disposals of Securities at Amortized Cost
During the quarters ended January 31, 2025 and 2024, the Bank disposed of
certain debt securities measured at amortized cost. The carrying value of
these securities upon disposal was $2,950 million for the quarter ended
January 31, 2025 ($120 million for the quarter ended January 31, 2024), and
the Bank recognized gains of $3 million for the quarter ended January 31,
2025 (a negligible amount for the quarter ended January 31, 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
January 31, 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.
As at January 31, 2025
Non-impaired loans Impaired loans Loans at fair value Total
through profit or loss((1))
Stage 1 Stage 2 Stage 3 POCI
Residential mortgage
Excellent 33,854 19 − − − 33,873
Good 16,809 242 − − − 17,051
Satisfactory 14,542 3,874 − − − 18,416
Special mention 356 740 − − − 1,096
Substandard 68 275 − − − 343
Default − − 128 − − 128
IRB Approach 65,629 5,150 128 − − 70,907
Standardized Approach 11,841 314 568 247 13,762 26,732
Gross carrying amount 77,470 5,464 696 247 13,762 97,639
Allowances for credit losses((2)) 63 86 154 (88) − 215
Carrying amount 77,407 5,378 542 335 13,762 97,424
Personal
Excellent 21,841 190 − − − 22,031
Good 6,767 1,441 − − − 8,208
Satisfactory 6,976 2,120 − − − 9,096
Special mention 2,125 805 − − − 2,930
Substandard 50 284 − − − 334
Default − − 247 − − 247
IRB Approach 37,759 4,840 247 − − 42,846
Standardized Approach 3,610 95 115 106 − 3,926
Gross carrying amount 41,369 4,935 362 106 − 46,772
Allowances for credit losses((2)) 106 136 168 (15) − 395
Carrying amount 41,263 4,799 194 121 − 46,377
Credit card
Excellent 477 − − − − 477
Good 386 − − − − 386
Satisfactory 730 32 − − − 762
Special mention 488 227 − − − 715
Substandard 72 158 − − − 230
Default − − − − − −
IRB Approach 2,153 417 − − − 2,570
Standardized Approach 140 − − − − 140
Gross carrying amount 2,293 417 − − − 2,710
Allowances for credit losses((2)) 46 111 − − − 157
Carrying amount 2,247 306 − − − 2,553
Business and government
Excellent 5,504 − − − 1,625 7,129
Good 27,342 5 − − 7 27,354
Satisfactory 36,719 11,966 − − 145 48,830
Special mention 344 1,699 − − − 2,043
Substandard 4 548 − 1 − 553
Default − − 694 10 − 704
IRB Approach 69,913 14,218 694 11 1,777 86,613
Standardized Approach 13,940 139 215 10 65 14,369
Gross carrying amount 83,853 14,357 909 21 1,842 100,982
Allowances for credit losses((2)) 221 209 279 7 − 716
Carrying amount 83,632 14,148 630 14 1,842 100,266
Total loans
Gross carrying amount 204,985 25,173 1,967 374 15,604 248,103
Allowances for credit losses((2)) 436 542 601 (96) − 1,483
Carrying amount 204,549 24,631 1,366 470 15,604 246,620
(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.)
As at October 31, 2024
Non-impaired loans Impaired loans Loans at fair value Total
through profit or loss((1))
Stage 1 Stage 2 Stage 3 POCI
Residential mortgage
Excellent 33,651 16 − − − 33,667
Good 17,063 241 − − − 17,304
Satisfactory 12,634 4,209 − − − 16,843
Special mention 358 800 − − − 1,158
Substandard 70 300 − − − 370
Default − − 118 − − 118
IRB Approach 63,776 5,566 118 − − 69,460
Standardized Approach 11,350 266 494 247 13,192 25,549
Gross carrying amount 75,126 5,832 612 247 13,192 95,009
Allowances for credit losses((2)) 62 85 137 (87) − 197
Carrying amount 75,064 5,747 475 334 13,192 94,812
Personal
Excellent 21,702 274 − − − 21,976
Good 6,686 1,618 − − − 8,304
Satisfactory 6,959 2,247 − − − 9,206
Special mention 2,111 845 − − − 2,956
Substandard 53 279 − − − 332
Default − − 226 − − 226
IRB Approach 37,511 5,263 226 − − 43,000
Standardized Approach 3,580 84 101 118 − 3,883
Gross carrying amount 41,091 5,347 327 118 − 46,883
Allowances for credit losses((2)) 102 123 146 (11) − 360
Carrying amount 40,989 5,224 181 129 − 46,523
Credit card
Excellent 551 − − − − 551
Good 399 − − − − 399
Satisfactory 729 28 − − − 757
Special mention 484 211 − − − 695
Substandard 69 149 − − − 218
Default − − − − − −
IRB Approach 2,232 388 − − − 2,620
Standardized Approach 141 − − − − 141
Gross carrying amount 2,373 388 − − − 2,761
Allowances for credit losses((2)) 42 114 − − − 156
Carrying amount 2,331 274 − − − 2,605
Business and government
Excellent 7,743 − − − 1,486 9,229
Good 27,950 7 − − 53 28,010
Satisfactory 34,626 11,381 − − 147 46,154
Special mention 255 1,770 − − − 2,025
Substandard 2 481 − 2 − 485
Default − − 555 10 − 565
IRB Approach 70,576 13,639 555 12 1,686 86,468
Standardized Approach 12,879 107 158 14 94 13,252
Gross carrying amount 83,455 13,746 713 26 1,780 99,720
Allowances for credit losses((2)) 218 181 225 4 − 628
Carrying amount 83,237 13,565 488 22 1,780 99,092
Total loans
Gross carrying amount 202,045 25,313 1,652 391 14,972 244,373
Allowances for credit losses((2)) 424 503 508 (94) − 1,341
Carrying amount 201,621 24,810 1,144 485 14,972 243,032
(1) Not subject to expected credit losses.
(2) The allowances for credit losses do not include the amounts
related to undrawn commitments reported in the Other liabilities item of the
Consolidated Balance Sheet.
The following table presents the credit risk exposures of off-balance-sheet
commitments as at January 31, 2025 and as at October 31, 2024 according to
credit quality and ECL impairment stage.
As at January 31, 2025 As at October 31, 2024
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
Off-balance-sheet commitments((1))
Retail
Excellent 16,425 83 − 16,508 16,159 113 − 16,272
Good 3,593 392 − 3,985 3,492 415 − 3,907
Satisfactory 1,121 251 − 1,372 1,095 249 − 1,344
Special mention 406 121 − 527 381 112 − 493
Substandard 30 48 − 78 30 35 − 65
Default − − 2 2 − − 1 1
Non-retail
Excellent 13,728 − − 13,728 13,071 − − 13,071
Good 22,272 − − 22,272 22,547 − − 22,547
Satisfactory 16,420 6,634 − 23,054 15,513 6,351 − 21,864
Special mention 31 313 − 344 24 278 − 302
Substandard 4 46 − 50 2 52 − 54
Default − − 24 24 − − 27 27
IRB Approach 74,030 7,888 26 81,944 72,314 7,605 28 79,947
Standardized Approach 18,177 − − 18,177 18,968 − − 18,968
Total exposure 92,207 7,888 26 100,121 91,282 7,605 28 98,915
Allowances for credit losses 154 72 1 227 142 72 − 214
Total exposure, net
of allowances 92,053 7,816 25 99,894 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 January 31, 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 224 126 32 79 179 121 30 76
61 to 90 days 89 58 18 54 82 48 14 33
Over 90 days((2)) − − 36 − − − 35 −
313 184 86 133 261 169 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 January 31, 2025 As at October 31, 2024
Gross Allowances for Net Gross Allowances for Net
credit losses credit losses
Loans - Stage 3
Residential mortgage 696 154 542 612 137 475
Personal 362 168 194 327 146 181
Credit card((1)) − − − − − −
Business and government 909 279 630 713 225 488
1,967 601 1,366 1,652 508 1,144
Loans - POCI 374 (96) 470 391 (94) 485
2,341 505 1,836 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.
Note 6 - Loans and Allowances for Credit Losses (cont.)
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 January 31, 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 January 31, 2025
Balance sheet
Cash and deposits with financial institutions((2)(3)) 9 2 − − − 11
Securities((3))
At fair value through other comprehensive income((4)) 3 1 − − − 4
At amortized cost((2)) 6 − − − − 6
Securities purchased under reverse repurchase
agreements and securities borrowed((2)(3)) − − − − − −
Loans((5))
Residential mortgage 197 14 (1) − 5 215
Personal 360 66 (38) − 7 395
Credit card 156 28 (31) − 4 157
Business and government 628 130 (45) − 3 716
1,341 238 (115) − 19 1,483
Other assets((2)(3)) − − − − − −
Off-balance-sheet commitments((6))
Letters of guarantee and documentary letters of credit 21 1 − − − 22
Undrawn commitments 188 12 − − − 200
Backstop liquidity and credit enhancement facilities 5 − − − − 5
214 13 − − − 227
1,573 254 (115) − 19 1,731
Quarter ended January 31, 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 January 31, 2024
Balance sheet
Cash and deposits with financial institutions((2)(3)) 10 (3) − − − 7
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 15 (1) − (2) 166
Personal 271 44 (23) − 1 293
Credit card 139 27 (26) − 4 144
Business and government 567 23 (44) − 10 556
Customers' liability under acceptances 53 (1) − − − 52
1,184 108 (94) − 13 1,211
Other assets((2)(3)) − − − − − −
Off-balance-sheet commitments((6))
Letters of guarantee and documentary letters of credit 16 3 − − − 19
Undrawn commitments 152 14 − − − 166
Backstop liquidity and credit enhancement facilities 8 (1) − − − 7
176 16 − − − 192
1,377 120 (94) − 13 1,416
(1) The contractual amount outstanding on financial assets that were
written off during the quarter ended January 31, 2025 and that are still
subject to enforcement activity was $51 million ($35 million for the quarter
ended January 31, 2024).
(2) These financial assets are presented net of the allowances for credit
losses on the Consolidated Balance Sheet.
(3) As at January 31, 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 January 31, 2025 Quarter ended January 31, 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 non-impaired loans impaired loans
Stage 1 Stage 2 Stage 3 POCI((1)) Stage 1 Stage 2 Stage 3 POCI((1))
Residential mortgage
Balance at beginning 62 85 137 (87) 197 69 93 87 (95) 154
Originations or purchases 4 − − − 4 2 − − − 2
Transfers((2)):
to Stage 1 13 (12) (1) − − 16 (14) (2) − −
to Stage 2 (2) 6 (4) − − (3) 7 (4) − −
to Stage 3 − (5) 5 − − − (13) 13 − −
Net remeasurement of loss allowances((3)) (15) 11 15 3 14 (8) 33 (1) 1 25
Derecognitions((4)) (1) (1) (2) − (4) (2) (2) (2) − (6)
Changes to models − − − − − (2) (12) 8 − (6)
Provisions for credit losses (1) (1) 13 3 14 3 (1) 12 1 15
Write-offs − − (1) − (1) − − (1) − (1)
Disposals − − − − − − − − − −
Recoveries − − 1 − 1 − − − − −
Foreign exchange movements and other 2 2 4 (4) 4 (1) (1) (2) 2 (2)
Balance at end 63 86 154 (88) 215 71 91 96 (92) 166
Includes:
Amounts drawn 63 86 154 (88) 215 71 91 96 (92) 166
Undrawn commitments((5)) − − − − − − − − − −
Personal
Balance at beginning 107 127 146 (11) 369 95 114 87 (15) 281
Originations or purchases 10 − − − 10 7 − − − 7
Transfers((2)):
to Stage 1 26 (24) (2) − − 21 (19) (2) − −
to Stage 2 (11) 12 (1) − − (5) 6 (1) − −
to Stage 3 − (20) 20 − − − (18) 18 − −
Net remeasurement of loss allowances((3)) (21) 47 40 (3) 63 (17) 39 19 1 42
Derecognitions((4)) (2) (3) (2) − (7) (2) (4) (1) − (7)
Changes to models − − − − − − (1) 3 − 2
Provisions for credit losses 2 12 55 (3) 66 4 3 36 1 44
Write-offs − − (38) − (38) − − (23) − (23)
Disposals − − − − − − − − − −
Recoveries − − 4 − 4 − − 4 − 4
Foreign exchange movements and other 2 1 1 (1) 3 (2) (1) (1) 1 (3)
Balance at end 111 140 168 (15) 404 97 116 103 (13) 303
Includes:
Amounts drawn 106 136 168 (15) 395 92 111 103 (13) 293
Undrawn commitments((5)) 5 4 − − 9 5 5 − − 10
(1) No POCI loans were acquired during the quarters ended
January 31, 2025 and 2024.
(2) Represent stage transfers deemed to have taken place at the
beginning of the quarter in which the transfer occurred.
(3) Includes the net remeasurement of loss allowances (after
transfers) attributable mainly to changes in volumes and in the credit quality
of existing loans as well as to changes in risk parameters.
(4) Represent reversals to loss allowances arising from full loan
repayments (excluding write-offs and disposals).
(5) The allowances for credit losses on undrawn commitments are
reported in the Other liabilities item of the Consolidated Balance Sheet.
Note 6 - Loans and Allowances for Credit Losses (cont.)
Quarter ended January 31, 2025 Quarter ended January 31, 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 non-impaired loans impaired loans
Stage 1 Stage 2 Stage 3 POCI((1)) Stage 1 Stage 2 Stage 3 POCI((1))
Credit card
Balance at beginning 70 141 − − 211 59 127 − − 186
Originations or purchases 3 − − − 3 2 − − − 2
Transfers((2)):
to Stage 1 27 (27) − − − 29 (29) − − −
to Stage 2 (6) 6 − − − (5) 5 − − −
to Stage 3 − (13) 13 − − − (10) 10 − −
Net remeasurement of loss allowances((3)) (15) 36 14 − 35 (25) 38 12 − 25
Derecognitions((4)) (1) − − − (1) (1) − − − (1)
Changes to models − − − − − − − − − −
Provisions for credit losses 8 2 27 − 37 − 4 22 − 26
Write-offs − − (31) − (31) − − (26) − (26)
Disposals − − − − − − − − − −
Recoveries − − 4 − 4 − − 4 − 4
Foreign exchange movements and other − − − − − − − − − −
Balance at end 78 143 − − 221 59 131 − − 190
Includes:
Amounts drawn 46 111 − − 157 34 110 − − 144
Undrawn commitments((5)) 32 32 − − 64 25 21 − − 46
Business and government
Balance at beginning 308 215 225 4 752 251 220 244 − 715
Originations or purchases 37 − − − 37 39 − − − 39
Transfers((2)):
to Stage 1 14 (14) − − − 9 (8) (1) − −
to Stage 2 (12) 15 (3) − − (13) 14 (1) − −
to Stage 3 − (5) 5 − − − (2) 2 − −
Net remeasurement of loss allowances((3)) (22) 39 100 1 118 (1) − 31 (11) 19
Derecognitions((4)) (9) (12) (1) − (22) (8) (6) (3) − (17)
Changes to models − − − − − − (5) 1 − (4)
Provisions for credit losses 8 23 101 1 133 26 (7) 29 (11) 37
Write-offs − − (45) − (45) − − (44) − (44)
Disposals − − − − − − − − − −
Recoveries − − − 2 2 − − 1 13 14
Foreign exchange movements and other 2 − (1) − 1 (1) − (3) − (4)
Balance at end 318 238 280 7 843 276 213 227 2 718
Includes:
Amounts drawn 221 209 279 7 716 193 186 227 2 608
Undrawn commitments((5)) 97 29 1 − 127 83 27 − − 110
Total allowances for credit losses at end((6)) 570 607 602 (96) 1,683 503 551 426 (103) 1,377
Includes:
Amounts drawn 436 542 601 (96) 1,483 390 498 426 (103) 1,211
Undrawn commitments((5)) 134 65 1 − 200 113 53 − − 166
(1) No POCI loans were acquired during the quarters ended
January 31, 2025 and 2024.
(2) Represent stage transfers deemed to have taken place at the
beginning of the quarter in which the transfer occurred.
(3) Includes the net remeasurement of loss allowances (after
transfers) attributable mainly to changes in volumes and in the credit quality
of existing loans as well as to changes in risk parameters.
(4) Represent reversals to loss allowances arising from full loan
repayments (excluding write-offs and disposals).
(5) The allowances for credit losses on undrawn commitments are
reported in the Other liabilities item of the Consolidated Balance Sheet.
(6) 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 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 January 31, 2025, the macroeconomic outlook remained
essentially unchanged, and uncertainty remained high.
There is still some ambiguity over whether the new American president is
threatening tariffs on Canada as a negotiating tactic on security issues, or
whether they reflect his protectionist ambitions, or both. We should know more
when the investigation into trade deficits is released in April 2025. For now,
we continue to believe that this investigation will support the view that
Canada is a good trading partner, and that across-the-board tariffs will be
avoided. The fact remains, however, that as long as the climate of uncertainty
persists, it will undermine the country's business climate. The lack of
visibility is such that many companies could keep investment projects on hold.
Conditions in the labour market have recently improved, with the unemployment
rate falling by 0.3 percentage point lower from November 2024 to January
2025. It remains to be seen whether this trend will continue, as the
proportion of companies reporting labour shortages remains very low and the
number of job vacancies in the private sector continues to be low.
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 6.9% after 12 months, an increase of 0.2
percentage point. Despite the slight deterioration in the labour market, real
estate prices are on the rise, as pent-up demand from the past two years is
released under a less restrictive monetary policy. As a result, house prices
are up 6.4% year over year, also boosted by the longer maximum amortization
period. The S&P/TSX sits at 22,750 points after one year, and the price of
oil is at US$65.
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 (0.3 percentage point lower). House
prices rise 9.7%, the S&P/TSX sits at 25,824 points after one year, and
the price of oil is at US$82.
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 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 9.7%.
House prices fall sharply (-13.9%). The S&P/TSX sits at 18,477 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 January 31, 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 January 31, 2025 1,177
Simulations
100% upside scenario 759
100% base scenario 923
100% downside scenario 1,535
Note 7 - Other Assets
As at January 31, 2025 As at October 31, 2024
Receivables, prepaid expenses and other items 3,789 3,579
Interest and dividends receivable 1,586 1,742
Due from clients, dealers and brokers 1,346 1,302
Defined benefit asset 518 487
Deferred tax assets 810 828
Current tax assets 776 669
Reinsurance contract assets 22 22
Insurance contract assets 44 41
Investments in associates and joint ventures 45 40
Commodities((1)) 521 573
9,457 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 January 31, 2025 As at October 31, 2024
On demand((1)) After notice((2)) Fixed term((3)) Total Total
Personal 5,704 42,475 50,682 98,861 95,181
Business and government((4)) 67,050 27,399 152,001 246,450 232,730
Deposit-taking institutions 1,675 83 4,026 5,784 5,634
74,429 69,957 206,709 351,095 333,545
(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 January 31, 2025, business and government deposits
included subscription receipts of $1.1 billion issued as part of the agreement
to acquire CWB ($1.0 billion as at October 31, 2024). 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 $11.1 billion as at January 31, 2025
($11.4 billion as at October 31, 2024). During the quarter ended January 31,
2025, an amount of US$255 million in covered bonds came to maturity
(750 million euros in covered bonds came to maturity during the quarter ended
January 31, 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 January 31, 2025, the Deposits - Business and government
item also includes deposits of $23.8 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 January 31, 2025 As at October 31, 2024
Accounts payable and accrued expenses 2,744 3,433
Subsidiaries' debts to third parties 321 236
Interest and dividends payable 2,026 2,290
Lease liabilities 497 472
Due to clients, dealers and brokers 1,098 853
Defined benefit liability 105 103
Allowances for credit losses - Off-balance-sheet commitments (Note 6) 227 214
Deferred tax liabilities 86 69
Current tax liabilities 199 123
Insurance contract liabilities 27 28
Other items((1)(2)(3)) 977 865
8,307 8,686
(1) As at January 31, 2025, Other items included provisions for
litigation of $9 million ($10 million as at October 31, 2024).
(2) As at January 31, 2025, Other items included provisions for
onerous contracts of $16 million ($18 million as at October 31, 2024).
(3) As at January 31, 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 $5 million ($5 million as at
October 31, 2024).
Note 10 - Subscription Receipts
In connection with the CWB transaction, the Bank 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 issued and sold
4,453,000 subscription receipts at a price of $112.30 for total gross proceeds
of approximately $500 million. The Public Offering was underwritten on a
bought-deal basis by a syndicate of underwriters (the Underwriters). On July
17, 2024, the Bank issued and sold 178,250 additional subscription receipts
pursuant to the partial exercise of the Underwriters' over-allotment option.
Pursuant to the Concurrent Private Placement, on June 17, 2024, the Bank
issued and sold 4,453,000 subscription receipts at a price of $112.30 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 issued and
sold 178,250 additional subscription receipts to an affiliate of CDPQ pursuant
to CDPQ's option to purchase additional subscription receipts to maintain its
pro-rata ownership.
Each subscription receipt entitles the holder thereof to receive automatically
upon closing of the 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 falls
within the period from June 17, 2024 up to (but excluding) the last day the
subscription receipts are 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. As of January 31, 2025, the total amount related to the subscription
receipts, including accrued interest was $1.1 billion, net of transaction
costs. This amount is included in the Deposits - Business and government. For
additional information, see Note 8.
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 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 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 January 31, 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 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
66,000,000 1,650 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 67,500,000 3,150 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 384,676 28 2,297,601 146
Impact of shares purchased or sold for trading((2)) (43,347) (6) 161,646 23
Common shares at end of period 341,085,205 3,485 340,743,876 3,463
(1) Limited Recourse Capital Notes (LRCN).
(2) As at January 31, 2025, a total of 145,024 shares were sold short
for trading, representing $20 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
Quarter ended January 31
2025 2024
Dividends Dividends Dividends Dividends
or interest per share or interest per share
$ $
First Preferred Shares
Series 30 5 0.3869 3 0.2516
Series 32 3 0.2399 3 0.2399
Series 38 7 0.4392 7 0.4392
Series 40 5 0.3636 5 0.3636
Series 42 5 0.4410 5 0.4410
25 23
Other equity instruments
LRCN - Series 1((1)) 5 5
LRCN - Series 2((2)) 5 5
LRCN - Series 3((3)) 10 10
20 20
Preferred shares and other equity instruments 45 43
Common shares 389 1.1400 359 1.0600
434 402
(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.
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 quarters ended
January 31, 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 ended January 31, 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 January 31, 2025 As at October 31, 2024
Capital
CET1 20,141 19,321
Tier 1((3)) 22,986 22,470
Total((3)) 25,433 24,001
Risk-weighted assets 148,464 140,975
Total exposure 534,461 511,160
Capital ratios
CET1 13.6 % 13.7 %
Tier 1((3)) 15.5 % 15.9 %
Total((3)) 17.1 % 17.0 %
Leverage ratio((3)) 4.3 % 4.4 %
Available TLAC 46,331 44,040
TLAC ratio 31.2 % 31.2 %
TLAC leverage ratio 8.7 % 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.
(3) Figures as at January 31, 2025 include the redemption of the
Series 32 preferred shares completed on February 17, 2025.
Note 14 - Share-Based Payments
Stock Option Plan
During the quarter ended January 31, 2025, the Bank awarded 1,004,492 stock
options (1,222,652 stock options during the quarter ended January 31, 2024)
with an average fair value of $23.26 per option ($13.74 in 2024).
As at January 31, 2025, there were 11,061,775 stock options outstanding
(10,443,059 stock options as at October 31, 2024).
The average fair value of the options awarded was estimated on the award date
using the Black-Scholes model as well as the following accounting assumptions.
Quarter ended January 31
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%
During the quarter ended January 31, 2025, a $5 million compensation expense
was recorded for this plan ($4 million for the quarter ended
January 31, 2024).
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 January 31
Pension plans Other post-employment benefit plans
2025 2024 2025 2024
Current service cost 27 20 − −
Interest expense (income), net (5) (4) 1 1
Administrative costs 1 1
Expense of the defined benefit component 23 17 1 1
Expense of the defined contribution component 7 4
Expense recognized in Net income 30 21 1 1
Remeasurements((1))
Actuarial (gains) losses on the defined benefit obligation 112 504 2 8
Return on plan assets((2)) (119) (523)
Remeasurements recognized in Other comprehensive income (7) (19) 2 8
23 2 3 9
(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
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 ended January
31, 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 January 31, 2025, the Bank continues to apply the exception to the
recognition and disclosure of information of deferred tax assets and
liabilities arising from the Pillar 2 rules in the jurisdictions where they
have been included in a bill or enacted.
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 January 31
2025 2024
Basic earnings per share
Net income attributable to the Bank's shareholders and holders of other equity 997 922
instruments
Dividends on preferred shares and distributions on other equity instruments 39 37
Net income attributable to common shareholders 958 885
Weighted average basic number of common shares outstanding (thousands) 340,739 338,675
Basic earnings per share (dollars) 2.81 2.61
Diluted earnings per share
Net income attributable to common shareholders 958 885
Weighted average basic number of common shares outstanding (thousands) 340,739 338,675
Adjustment to average number of common shares (thousands)
Stock options((1)) 4,215 2,664
Weighted average diluted number of common shares outstanding (thousands) 344,954 341,339
Diluted earnings per share (dollars) 2.78 2.59
(1) For the quarter ended January 31, 2025, 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. For the
quarter ended January 31, 2024, the calculation of diluted earnings per share
excluded an average number of 1,719,303 options outstanding with a weighted
average exercise price of $96.35 given that the exercise price of these
options was greater than the average price of the Bank's common shares.
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.
Note 18 - Segment Disclosures (cont.)
Quarter ended January 31((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((2)) 944 870 227 198 (509) (553) 370 301 (60) (65) 972 751
Non-interest income((3)) 260 284 549 462 1,416 1,200 35 25 (49) (12) 2,211 1,959
Total revenues 1,204 1,154 776 660 907 647 405 326 (109) (77) 3,183 2,710
Non-interest expenses((4)) 641 615 441 390 367 313 123 100 74 31 1,646 1,449
Income before provisions for credit 563 539 335 270 540 334 282 226 (183) (108) 1,537 1,261
losses and income taxes
Provisions for credit losses 162 71 2 − 36 17 51 36 3 (4) 254 120
Income before income taxes (recovery) 401 468 333 270 504 317 231 190 (186) (104) 1,283 1,141
Income taxes (recovery) 111 129 91 74 87 9 48 40 (51) (33) 286 219
Net income 290 339 242 196 417 308 183 150 (135) (71) 997 922
Non-controlling interests − − − − − − − − − − − −
Net income attributable
to the Bank's shareholders and holders of other equity instruments 290 339 242 196 417 308 183 150 (135) (71) 997 922
Average assets((5)) 165,861 155,031 10,611 8,708 211,793 190,443 31,197 26,025 68,746 62,459 488,208 442,666
Total assets 167,754 156,433 11,047 8,769 203,943 180,458 32,891 26,667 68,198 61,600 483,833 433,927
(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 January 31, 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).
(3) During the quarter ended January 31, 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 quarter ended January 31, 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.
(4) During the quarter ended January 31, 2025, the Bank recorded, in
the Other heading, acquisition and integration charges of $26 million ($19
million net of income taxes) related to the CWB transaction.
(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.
Note 19 - Events After the Consolidated Balance Sheet Date
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 awards. 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 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 $45.5 billion to assets and $37.8 billion to liabilities at
acquisition date. Goodwill of $1.6 billion reflects the expected expense
synergies from our Personal and Commercial and Wealth Management banking
services operations and the expected growth of the technology platforms.
Goodwill is not deductible for tax purposes. The results of CWB will be
consolidated in the Bank's financial statements as of February 3, 2025.
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)) 37,879
Derivative financial instruments 127
Premises and equipment 225
Goodwill 1,552
Intangible assets((2)) 680
Other assets((3)) 368
45,460
Liabilities
Deposits((4)) 33,328
Obligations related to securities sold under repurchase agreements 16
and securities loaned
Derivative financial instruments 40
Liabilities related to transferred receivables 2,593
Other liabilities((5)) 1,255
Subordinated debt 554
37,786
Total identifiable net assets acquired and goodwill 7,674
Consideration transferred
Equity issued 5,290
Settlement of pre-existing relationships 1,400
Issuance of replacement share-based payment awards 62
6,752
Previously held interest 329
Non-controlling interest 593
Purchase consideration 7,674
(1) Includes residential mortgage loans, personal loans, credit card
receivables and business and government loans.
(2) Includes core deposit intangibles and customer relationships.
(3) Includes interest receivable, derivative collateral receivable,
receivables, deferred tax assets and other assets items.
(4) Includes personal deposits, business and government deposits, and
deposit-taking institutions deposits.
(5) Includes accounts payable and accrued expenses, interest payable,
lease liabilities and other liabilities items.
Issuance of Common Shares
On February 3, 2025, the Bank issued a total of 50,272,878 common shares, for
a total proceed 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.
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 permit 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 meet the non-viability contingent capital
requirements (NVCC), these shares are eligible for regulatory capital purposes
under the Basel III rules. 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.
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.
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)
Communications and Corporate Social Responsibility
800 Saint-Jacques Street, 28(th) Floor
Montreal, Quebec H3C 1A3
Telephone: 514-394-8644
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
First Quarter 2025 Results
Conference Call
- A conference call for analysts and institutional investors will be
held on Wednesday, February 26, 2025 at 11:00 a.m. ET.
- Access by telephone in listen-only mode: 1-800-898-3989 or
416-340-2217. The access code is 4235703#.
- A recording of the conference call can be heard until May 23, 2025 by
dialing 1-800-408-3053 or 905-694-9451. The access code is 7336996#.
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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