COVID-19 Pandemic                                                     

 

On March 11, 2020, the World Health Organization (WHO) declared that the COVID-19 outbreak constituted a pandemic, requiring important protective measures to be taken to prevent overcrowding of health services and to strengthen preventive hygiene. This global pandemic prompted many countries, including Canada, to implement lockdown and social distancing measures designed to prevent new outbreaks. In many countries, those measures included the closing of aerial, maritime, and land borders.

 

During the summer of 2020, some of the restrictions imposed at the start of the pandemic were eased, but subsequent waves of COVID-19 in autumn 2020 forced authorities in a number of countries, including Canada, to reintroduce lockdown measures, effectively shutting down parts of the economy again. During the winter of 2021, a vaccination campaign began in Canada and picked up steam in the spring, leading to a reopening in early summer 2021. The authorities in many countries, including Canada, actively worked to ensure that widespread vaccination coverage was achieved as quickly as possible. However, uncertainty remains regarding the long-term effectiveness of the vaccines, the acceptance thereof by the public, and the anticipated reduction of infection rates, especially given a rise in cases linked to COVID-19 variants, which appear to be more contagious. Certain measures by the public health authorities in Canada are expected to remain in place to continue limiting the spread of COVID-19 and its variants.

 

In Canada, banking services are considered essential services and were therefore maintained despite the lockdown and social distancing measures. Given the current economic and social conditions, the Bank is committed to supporting its employees, clients, and communities.

 

The Bank is continuing to closely monitor the potential impacts of the COVID-19 pandemic. It is not possible to predict the full impacts that the pandemic will have on the global economy, on the countries in which the Bank operates, on the Bank's clients, and on the Bank itself, including its business activities, results of operations, financial position, regulatory capital and liquidity ratios, reputation, and ability to satisfy regulatory requirements. The actual impacts will depend on future events that are highly uncertain, including the extent, severity, and duration of the COVID-19 pandemic, and on the effectiveness of actions and measures taken by governments, monetary authorities, and regulators over the long term.

 

For additional information on the impact of the COVID-19 risk factor, on relief measures offered to the Bank's clients, and on the measures introduced by regulators, see the COVID-19 Pandemic section on pages 16 to 18 of the 2021 Annual Report.

 

A number of the relief measures offered to the Bank's clients at the start of the pandemic ended in 2020, although some measures were being offered as part of various government programs in which the Bank is participating. These measures consist mainly of loans backed by government guarantees, particularly for businesses operating in sectors hit hardest by the pandemic. In the normal course of business, the Bank is continuing to address the specific needs of its clients to support them during this unprecedented crisis.

 

 

Financial Reporting Method                                                               

 

On November 1, 2020, the Bank amended the classification of certain Consolidated Statement of Income amounts to better reflect the nature of the revenues reported in the Wealth Management segment. The reclassifications were made retrospectively among the Non-interest income items and had no impact on the total revenues or on Net income.

 

Non-GAAP Financial Measures and Other Financial Measures

 

The Bank uses a number of financial measures when assessing its results and measuring overall performance. Some of these financial measures are not calculated in accordance with GAAP. Regulation 52-112 respecting Non-GAAP and Other Financial Measures Disclosure (Regulation 52-112) prescribes disclosure requirements that apply to the following measures used by the Bank:

 

·     non-GAAP financial measures;

·     non-GAAP ratios;

·     supplementary financial measures;

·     capital management measures;

·     segment measures.

 

Non-GAAP Financial Measures

The Bank uses non-GAAP financial measures that do not have standardized meanings under GAAP and that therefore may not be comparable to similar measures used by other companies. Presenting non-GAAP financial measures helps readers to better understand how management analyzes results, shows the impacts of specified items on the results of the reported periods, and allows readers to assess results without the specified items if they consider such items not to be reflective of the underlying performance of the Bank's operations. The Bank excludes from its results certain specified items that are inherently unpredictable. In addition, like many other financial institutions, the Bank uses the taxable equivalent basis to calculate net interest income, non-interest income, and income taxes. This calculation method consists of grossing up certain tax-exempt income (particularly dividends) by the income tax that would have been otherwise payable. An equivalent amount is added to income taxes. This adjustment is necessary in order to perform a uniform comparison of the return on different assets regardless of their tax treatment.

 

For additional information on non-GAAP financial measures, on non-GAAP ratios, on supplementary financial measures, on capital management measures, and on segment measures, see the Financial Reporting Method section and the Glossary section, on pages 18 to 21 and 123 to 126, respectively, of the MD&A in the 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

 

 

Reconciliation of Non-GAAP Financial Measures

 

Presentation of Results on a Taxable Equivalent Basis and Excluding Specified Items

 

Quarter ended October 31
(millions of Canadian dollars)												2021		2020
		Personal and Commercial		Wealth Management		Financial Markets		USSF&I		Other
Net interest income		661		115		243		241		(70)		1,190		1,124
Taxable equivalent		−		−		38		−		1		39		46
Net interest income on a taxable equivalent basis		661		115		281		241		(69)		1,229		1,170
Non-interest income		284		447		199		1		90		1,021		876
Taxable equivalent		−		−		2		−		−		2		3
Foreign currency translation loss on disposal of subsidiaries(1)		−		−		−		−		−		−		24
Non-interest income on a taxable equivalent basis and   excluding specified items		284		447		201		1		90		1,023		903
Total revenues on a taxable equivalent basis and   excluding specified items		945		562		482		242		21		2,252		2,073
Non-interest expenses		503		337		206		76		136		1,258		1,259
Impairment losses on premises and equipment and   on intangible assets(2)		−		−		−		−		(9)		(9)		(71)
Severance pay(3)		−		−		−		−		−		−		(48)
Non-interest expenses excluding specified items		503		337		206		76		127		1,249		1,140
Income before provisions for credit losses and income   taxes on a taxable equivalent basis and excluding specified items		442		225		276		166		(106)		1,003		933
Provisions for credit losses		(38)		1		(7)		3		−		(41)		110
Income before income taxes on a taxable equivalent basis
and excluding specified items		480		224		283		163		(106)		1,044		823
Income taxes		127		59		35		34		(37)		218		139
Taxable equivalent		−		−		40		−		1		41		49
Income taxes on foreign currency translation loss on disposal of     subsidiaries(1)		−		−		−		−		−		−		(12)
Income taxes related to impairment losses on premises and equipment   and on intangible assets(2)		−		−		−		−		2		2		19
Income taxes on severance pay(3)		−		−		−		−		−		−		13
Income taxes on a taxable equivalent basis and   excluding specified items		127		59		75		34		(34)		261		208
Net income excluding specified items		353		165		208		129		(72)		783		615
Specified items after income taxes		−		−		−		−		(7)		(7)		(123)
Net income		353		165		208		129		(79)		776		492
Non-controlling interests		−		−		−		−		−		−		2
Non-controlling interests on the foreign currency translation loss on   disposal of subsidiaries(1)		−		−		−		−		−		−		10
Non-controlling interests excluding specified items		−		−		−		−		−		−		12
Net income attributable to the Bank's shareholders   and holders of other equity instruments		353		165		208		129		(79)		776		490
Net income attributable to the Bank's shareholders   and holders of other equity instruments excluding specified items		353		165		208		129		(72)		783		603

 

(1)    During the quarter ended October 31, 2020, the Bank, through its subsidiary Credigy Ltd. (Credigy), had recorded a foreign currency translation loss on investments in foreign operations of $24 million ($36 million taking into account income taxes and $26 million taking into account income taxes and non-controlling interests) following a disposal of two subsidiaries in Brazil.

(2)    During the quarter ended October 31, 2021, the Bank recorded $9 million ($7 million net of income taxes) in impairment losses on intangible assets related to technology developments. During the quarter ended October 31, 2020, the Bank had recorded $71 million ($52 million net of income taxes) in impairment losses on premises and equipment and on intangible assets related to computer equipment and technology developments.

(3)    During the quarter ended October 31, 2020, following an optimization of certain organizational structures, the Bank had recorded $48 million ($35 million net of income taxes) in severance pay.

Year ended October 31
(millions of Canadian dollars)												2021		2020
		Personal and Commercial		Wealth Management		Financial Markets		USSF&I		Other
Net interest income		2,583		448		1,051		907		(206)		4,783		4,255
Taxable equivalent		−		−		175		−		6		181		208
Net interest income on a taxable equivalent basis		2,583		448		1,226		907		(200)		4,964		4,463
Non-interest income		1,103		1,721		912		94		314		4,144		3,672
Taxable equivalent		−		−		8		−		−		8		57
Foreign currency translation loss on disposal of subsidiaries(1)		−		−		−		−		−		−		24
Non-interest income on a taxable equivalent basis and   excluding specified items		1,103		1,721		920		94		314		4,152		3,753
Total revenues on a taxable equivalent basis and   excluding specified items		3,686		2,169		2,146		1,001		114		9,116		8,216
Non-interest expenses		1,958		1,277		880		315		423		4,853		4,545
Impairment losses on premises and equipment and   on intangible assets(2)		−		−		−		−		(9)		(9)		(71)
Severance pay(3)		−		−		−		−		−		−		(48)
Charge related to Maple(4)		−		−		−		−		−		−		(13)
Non-interest expenses excluding specified items		1,958		1,277		880		315		414		4,844		4,413
Income before provisions for credit losses and income   taxes on a taxable equivalent basis and excluding specified items		1,728		892		1,266		686		(300)		4,272		3,803
Provisions for credit losses		6		1		10		(15)		−		2		846
Income before income taxes on a taxable equivalent basis
and excluding specified items		1,722		891		1,256		701		(300)		4,270		2,957
Income taxes		456		236		150		146		(93)		895		453
Taxable equivalent		−		−		183		−		6		189		265
Income taxes on foreign currency translation loss on disposal of     subsidiaries(1)		−		−		−		−		−		−		(12)
Income taxes related to impairment losses on premises and equipment   and on intangible assets(2)		−		−		−		−		2		2		19
Income taxes on severance pay(3)		−		−		−		−		−		−		13
Income taxes on the charge related to Maple(4)		−		−		−		−		−		−		3
Income taxes on a taxable equivalent basis and   excluding specified items		456		236		333		146		(85)		1,086		741
Net income excluding specified items		1,266		655		923		555		(215)		3,184		2,216
Specified items after income taxes		−		−		−		−		(7)		(7)		(133)
Net income		1,266		655		923		555		(222)		3,177		2,083
Non-controlling interests		−		−		−		−		−		−		42
Non-controlling interests on the foreign currency translation loss on   disposal of subsidiaries(1)		−		−		−		−		−		−		10
Non-controlling interests excluding specified items		−		−		−		−		−		−		52
Net income attributable to the Bank's shareholders   and holders of other equity instruments		1,266		655		923		555		(222)		3,177		2,041
Net income attributable to the Bank's shareholders   and holders of other equity instruments excluding specified items		1,266		655		923		555		(215)		3,184		2,164

 

(1)    During the year ended October 31, 2020, the Bank, through its subsidiary Credigy Ltd. (Credigy), had recorded a foreign currency translation loss on investments in foreign operations of $24 million ($36 million taking into account income taxes and $26 million taking into account income taxes and non-controlling interests) following a disposal of two subsidiaries in Brazil.

(2)    During the year ended October 31, 2021, the Bank recorded $9 million ($7 million net of income taxes) in impairment losses on intangible assets related to technology developments. During the year ended October 31, 2020, the Bank had recorded $71 million ($52 million net of income taxes) in impairment losses on premises and equipment and on intangible assets related to computer equipment and technology developments.

(3)    During the year ended October 31, 2020, following an optimization of certain organizational structures, the Bank had recorded $48 million ($35 million net of income taxes) in severance pay.

(4)    During the year ended October 31, 2020, the Bank had recorded a charge of $13 million ($10 million net of income taxes) related to Maple Financial Group Inc. (Maple).

 

 

Presentation of Diluted Earnings Per Share Excluding Specified Items

 

(Canadian dollars)				Quarter ended October 31										Year ended October 31
					2021				2020		% Change			2021				2020		% Change
Diluted earnings per share				$	2.19			$	1.36		61		$	8.96			$	5.70			57
	Specified items(1)
	Foreign currency translation loss on disposal of subsidiaries				−				0.08					−				0.08
	Impairment losses on premises and equipment and    on intangible assets				0.02				0.15					0.02				0.15
	Severance pay				−				0.10					−				0.10
	Charge related to Maple				−				−					−				0.03
Diluted earnings per share excluding specified items				$	2.21			$	1.69		31		$	8.98			$	6.06			48

 

(1)    For additional information on specified items, see the tables on pages 3 and 4 entitled Presentation of Results on a Taxable Equivalent Basis and Excluding Specified Items.

 

Presentation of Results on a Taxable Equivalent Basis

 

(millions of Canadian dollars)		Quarter ended October 31							Year ended October 31
		2021			2020		% Change		2021			2020		% Change
Operating results
Net interest income		1,190			1,124		6		4,783			4,255		12
Non-interest income		1,021			876		17		4,144			3,672		13
Total revenues		2,211			2,000		11		8,927			7,927		13
Non-interest expenses		1,258			1,259		−		4,853			4,545		7
Income before provisions for credit losses and income taxes		953			741		29		4,074			3,382		20
Provisions for credit losses		(41)			110				2			846
Income before income taxes		994			631		58		4,072			2,536		61
Income taxes		218			139		57		895			453		98
Net income		776			492		58		3,177			2,083		53
Taxable equivalent basis
Net interest income		39			46				181			208
Non-interest income		2			3				8			57
Income taxes		41			49				189			265
Impact of taxable equivalent basis on net income		−			−				−			−
Operating results on a taxable equivalent basis
Net interest income on a taxable equivalent basis		1,229			1,170		5		4,964			4,463		11
Non-interest income on a taxable equivalent basis		1,023			879		16		4,152			3,729		11
Total revenues on a taxable equivalent basis		2,252			2,049		10		9,116			8,192		11
Non-interest expenses		1,258			1,259		−		4,853			4,545		7
Income before provisions for credit losses and income taxes   on a taxable equivalent basis		994			790		26		4,263			3,647		17
Provisions for credit losses		(41)			110				2			846
Income before income taxes on a taxable equivalent basis		1,035			680		52		4,261			2,801		52
Income taxes on a taxable equivalent basis		259			188		38		1,084			718		51
Net income		776			492		58		3,177			2,083		53

 

Highlights

 

(millions of Canadian dollars, except per share amounts)				Quarter ended October 31											Year ended October 31
				2021				2020			% Change				2021				2020				% Change
Operating results
Total revenues				2,211				2,000			11				8,927				7,927				13
Income before provisions for credit losses and income taxes				953				741			29				4,074				3,382				20
Net income				776				492			58				3,177				2,083				53
Net income attributable to the Bank's shareholders and   holders of other equity instruments				776				490			58				3,177				2,041				56
Return on common shareholders' equity(1)				18.7	%			13.7	%						20.7	%			14.9		%
Earnings per share
	Basic		$	2.22			$	1.37			62			$	9.06			$	5.73				58
	Diluted			2.19				1.36			61				8.96				5.70				57
Operating results on a taxable equivalent basis  and excluding specified items(2)
Total revenues on a taxable equivalent basis and    excluding specified items				2,252				2,073			9				9,116				8,216				11
Income before provisions for credit losses and income taxes
	on a taxable equivalent basis and excluding specified items			1,003				933			8				4,272				3,803				12
Net income excluding specified items				783				615			27				3,184				2,216				44
Return on common shareholders' equity  excluding specified items(1)				18.9	%			17.1	%						20.8	%			15.8		%
Efficiency ratio on a taxable equivalent basis and   excluding specified items(1)				55.5	%			55.0	%						53.1	%			53.7		%
Earnings per share excluding specified items(2)
	Basic		$	2.24			$	1.70			32			$	9.08			$	6.10				49
	Diluted			2.21				1.69			31				8.98				6.06				48
Common share information
Dividends declared			$	0.71			$	0.71						$	2.84			$	2.84
Book value(1)				47.95				39.97							47.95				39.97
Share price
	High			104.32				72.85							104.32				74.79
	Low			95.00				62.99							65.54				38.73
	Close			102.46				63.94							102.46				63.94
Number of common shares (thousands)				337,912				335,998							337,912				335,998
Market capitalization				34,622				21,484							34,622				21,484
(millions of Canadian dollars)														As at October 31, 2021				As at October 31, 2020				% Change
Balance sheet and off-balance-sheet
Total assets														355,795				331,625				7
Loans and acceptances, net of allowances														182,689				164,740				11
Deposits														240,938				215,878				12
Equity attributable to common shareholders														16,203				13,430				21
Assets under administration(1)														651,530				509,071				28
Assets under management(1)														117,186				87,585				34
Regulatory ratios under Basel III(1)
Capital ratios
	Common Equity Tier 1 (CET1)													12.4		%		11.8		%
	Tier 1													15.0		%		14.9		%
	Total													15.9		%		16.0		%
Leverage ratio														4.4		%		4.4		%
Liquidity coverage ratio (LCR)(1)														154		%		161		%
Net stable funding ratio (NSFR)(1)														117		%
Regulatory ratios under Basel III (adjusted)(1)(3)
Capital ratios
	CET1													12.3		%		11.5		%
	Tier 1													14.9		%		14.6		%
	Total													15.9		%		16.0		%
Leverage ratio														4.4		%		4.3		%
Other information
Number of employees - Worldwide														26,920				26,517				2
Number of branches in Canada														384				403				(5)
Number of banking machines in Canada														927				940				(1)

(1)    For additional information on supplementary financial measures composition, non-GAAP ratios, and capital management measures, see the Financial Report Method section and the Glossary section on pages 18 to 21 and on pages 123 to 126, respectively, of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

(2)    For additional information on non-GAAP financial measures, see the Financial Reporting Method section on pages 2 to 5.

(3)    For additional information, see the section entitled COVID-19 Pandemic - Key Measures Introduced by the Regulatory Authorities on page 17 of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

 

 

 

 

 

Financial Analysis

 

This press release should be read in conjunction with the 2021 Annual Report (which includes the audited annual consolidated financial statements and MD&A) available on the Bank's website at nbc.ca. Additional information about the Bank, including the Annual Information Form, can be obtained from the Bank's website at nbc.ca or SEDAR's website at sedar.com.

 

Total Revenues

For the fourth quarter of 2021, the Bank's total revenues amounted to $2,211 million, up $211 million or 11% from the fourth quarter of 2020. In the Personal and Commercial segment, fourth-quarter total revenues rose 7% year over year owing to loan and deposit growth (partly offset by a narrowing of the net interest margin caused by lower interest rates) as well as to increases in credit card revenues, revenues from merger and acquisition activities, revenues from foreign exchange activities, and internal commission revenues related to the distribution of Wealth Management products. In the Wealth Management segment, fourth-quarter total revenues grew 20% year over year, resulting mainly from an increase in fee-based revenues given growth in average assets under administration and average assets under management and given an increase in transaction volume. In the Financial Markets segment, fourth-quarter total revenues on a taxable equivalent basis decreased by 3% year over year due to lower global markets revenues. In the USSF&I segment, fourth-quarter total revenues rose 4% year over year owing to sustained revenue growth at the ABA Bank subsidiary, given higher loan and deposit volumes, tempered by a decrease in revenues at the Credigy subsidiary related to downward remeasurements of certain loan portfolios. For the Other heading, fourth-quarter total revenues included gains on investments, a $33 million non-taxable gain following the remeasurement of the previously held equity interest in Flinks Technology Inc. (Flinks), a $30 million loss on a fair value measurement of the Bank's equity interest in AfrAsia Bank Limited (AfrAsia), and a lower contribution from Treasury activities. In the fourth quarter of fiscal 2020, total revenues had included a $24 million foreign currency translation loss on a disposal of subsidiaries. Total revenues on a taxable equivalent basis and excluding specified items amounted to $2,252 million in the fourth quarter of 2021, up 9% from $2,073 million in the fourth quarter of 2020.

 

For the year ended October 31, 2021, total revenues amounted to $8,927 million, up $1.0 billion or 13% from $7,927 million in fiscal 2020. In the Personal and Commercial segment, fiscal 2021 total revenues rose $229 million or 7% year over year due to an increase in net interest income arising from loan and deposit growth, as well as to increases in credit fee revenues, revenues from derivative financial instruments, credit card revenues, insurance revenues, and internal commission revenues related to the distribution of Wealth Management products. In the Wealth Management segment, fiscal 2021 total revenues were up 17% due to growth in fee-based revenues and in transaction-based and other revenues. In the Financial Markets segment, fiscal 2021 total revenues on a taxable equivalent basis rose $92 million or 4% year over year given growth in corporate and investment banking revenues, tempered by a decrease in global markets revenues. In the USSF&I segment, fiscal 2021 total revenues grew 22% year over year. Revenue growth at the ABA Bank subsidiary was driven by loan and deposit growth, while revenue growth at the Credigy subsidiary was notably due to a gain realized in fiscal 2021 upon the disposal of loan portfolios as well as to fair value remeasurements of certain loan portfolios. For the Other heading of segment results, fiscal 2021 total revenues included gains on investments, a $33 million non-taxable gain following a remeasurement of the previously held equity interest in Flinks, and a $30 million loss on the fair value measurement of the Bank's equity interest in AfrAsia. In fiscal 2020, total revenues had included a $24 million foreign currency translation loss on a disposal of subsidiaries. For the year ended October 31, 2021, total revenues on a taxable equivalent basis and excluding specified items amounted to $9,116 million, up 11% from $8,216 million in fiscal 2020.

 

Non-Interest Expenses

For the fourth quarter of 2021, non-interest expenses stood at $1,258 million, stable compared to the fourth quarter of 2020. An increase in compensation and employee benefits, in particular the variable compensation associated with revenue growth, was offset by a lower technology expense, essentially explained by $9 million in impairment losses on premises and equipment and on intangible assets in the fourth quarter of 2021 compared to $71 million in the same quarter of 2020. In the fourth quarter of 2020, non-interest expenses had also included $48 million in severance pay and expenses incurred by the Bank to implement health and safety measures for employees and clients in response to COVID-19, which were higher in that quarter. Fourth-quarter non-interest expenses excluding specified items stood at $1,249 million, up 10% from $1,140 million in the fourth quarter of 2020.

 

For the year ended October 31, 2021, non-interest expenses stood at $4,853 million, a 7% year-over-year increase that was essentially due to higher compensation and employee benefits, in particular the variable compensation associated with revenue growth. Technology expenses were also up due to significant investments made by the Bank for its transformation plan and business development purposes, partly offset by higher impairment losses, in fiscal 2020, on premises and equipment and on intangible assets. These increases were tempered, however, by decreases in certain variable expenses, in particular the compensatory tax on salaries as well as the expenses incurred by the Bank to take measures in response to COVID-19. In addition, in fiscal 2020, other expenses had included a $13 million charge related to Maple. Non-interest expenses excluding specified items stood at $4,844 million in fiscal 2021, up 10% from $4,413 million in fiscal 2020.

 

Provisions for Credit Losses 

For the fourth quarter of 2021, the Bank recorded $41 million in recoveries of credit losses compared to provisions for credit losses of $110 million recorded in the fourth quarter of 2020. This decrease was partly due to reversals of allowances for credit losses on non-impaired loans given improvements in the macroeconomic outlook and in credit conditions in the fourth quarter of 2021. In addition, provisions for credit losses on Personal Banking's impaired loans (including credit card receivables) and Commercial Banking's impaired loans were also down, whereas provisions for credit losses on the Financial Markets segment's impaired loans were up in the fourth quarter of 2021. The fourth-quarter provisions for credit losses on impaired loans of the Credigy subsidiary were also down compared to the same quarter of 2020, notably on purchased or originated credit-impaired (POCI) loans following a remeasurement of certain portfolios.

 

For the year ended October 31, 2021, the Bank recorded $2 million in provisions for credit losses compared to $846 million in fiscal 2020. This $844 million decrease was due to lower provisions for credit losses on non-impaired loans owing to improvements in the macroeconomic outlook and in credit conditions in fiscal 2021 compared to the significant deterioration in the macroeconomic outlook caused by COVID-19 in fiscal 2020. This decrease was also due to provisions for credit losses recorded on Personal Banking impaired loans (including credit card receivables) that were below pre-pandemic levels, in particular due to a decrease in insolvencies, to a reduction in client spending in the context of the pandemic, and to various assistance measures implemented by governments. The provisions for credit losses on impaired Commercial Banking and Credigy loans were also down compared to fiscal 2020. In the Financial Markets segment, the fiscal 2021 provisions for credit losses on impaired loans were up year over year.

 

Income Taxes 

For the fourth quarter of 2021, income taxes stood at $218 million compared to $139 million in the same quarter of 2020. The 2021 fourth-quarter effective income tax rate was 22%, unchanged from the fourth quarter of 2020.

 

For the year ended October 31, 2021, the effective income tax rate was 22% compared to 18% in fiscal 2020. This change in the effective tax rate stems mainly from a higher level and proportion of tax-exempt dividend income in fiscal 2020 as well as from a decrease in the income tax rate applicable to the ABA Bank subsidiary in 2020 due to tax incentive measures granted by the Cambodian government. 

Results by Segment

 

The Bank carries out its activities in four business segments: Personal and Commercial, Wealth Management, Financial Markets, and U.S. Specialty Finance and International. Other operating activities, certain specified items, Treasury activities, and the activities of the Flinks subsidiary are grouped in the Other heading. Each reportable segment is distinguished by services offered, type of clientele, and marketing strategy.

 

Personal and Commercial

 

(millions of Canadian dollars)			Quarter ended October 31								Year ended October 31
			2021			2020(1)			% Change		2021			2020(1)			% Change
Operating results
Net interest income			661			627			5		2,583			2,445			6
Non-interest income			284			254			12		1,103			1,012			9
Total revenues			945			881			7		3,686			3,457			7
Non-interest expenses			503			476			6		1,958			1,892			3
Income before provisions for credit losses and income taxes			442			405			9		1,728			1,565			10
Provisions for credit losses			(38)			67					6			517			(99)
Income before income taxes			480			338			42		1,722			1,048			64
Income taxes			127			89			43		456			278			64
Net income			353			249			42		1,266			770			64
Net interest margin(2)			2.06	%		2.19	%				2.12	%		2.19	%
Average interest-bearing assets(2)			127,244			113,749			12		121,593			111,488			9
Average assets(2)			134,335			119,504			12		127,716			117,338			9
Average loans and acceptances(2)			133,294			118,994			12		127,013			116,838			9
Net impaired loans(2)			218			412			(47)		218			412			(47)
Net impaired loans as a % of loans and acceptances(2)			0.2	%		0.4	%				0.2	%		0.4	%
Average deposits(2)			80,639			72,208			12		77,051			67,378			14
Efficiency ratio(2)			53.2	%		54.0	%				53.1	%		54.7	%

 

(1)    For the quarter and year ended October 31, 2020, certain amounts have been reclassified.

(2)    For additional information on supplementary financial measures composition, see the Glossary section on pages 123 to 126 of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

 

In the Personal and Commercial segment, net income totalled $353 million in the fourth quarter of 2021 compared to $249 million in the fourth quarter of 2020. This increase was driven by growth in total revenues, by lower provisions for credit losses on non-impaired loans given improvements in the macroeconomic outlook and in credit conditions, and by a decrease in provisions for credit losses on impaired loans. The segment's fourth-quarter income before provisions for credit losses and income taxes grew 9% year over year. Fourth-quarter net interest income was up 5% year over year, as growth in personal and commercial loans and deposits more than offset the impact of lower interest rates on the net interest margin, which was 2.06% compared to 2.19% in the fourth quarter of 2020. As for fourth-quarter non-interest income, it rose $30 million or 12% year over year.

 

Personal Banking's fourth-quarter total revenues increased by $24 million year over year. This increase came from loan and deposit growth (tempered by a lower net interest margin) and from increases in credit card revenues and internal commission revenues related to the distribution of Wealth Management products. Commercial Banking's fourth-quarter total revenues grew $40 million year over year, mainly due to an increase in net interest income driven by loan and deposit growth, and also to increases in revenues from foreign exchange activities and from merger and acquisition activities.

 

For the fourth quarter of 2021, the Personal and Commercial segment's non-interest expenses stood at $503 million, up 6% from the fourth quarter of 2020. This increase was mainly due to higher operations support charges and a higher amortization expense related to the segment's activities as well as to an increase in compensation and employee benefits. At 53.2%, the segment's fourth-quarter efficiency ratio improved by 0.8 percentage points compared to the fourth quarter of 2020. For the fourth quarter of 2021, the segment recorded $38 million in recoveries of credit losses compared to $67 million in provisions for credit losses recorded in the fourth quarter of 2020. This decrease stems from reversals of allowances for credit losses on non-impaired loans given improvements in the macroeconomic outlook and in credit conditions in the fourth quarter of 2021, whereas, in the fourth quarter of 2020, higher provisions for credit losses on impaired loans had been recorded. In addition, the provisions for credit losses on Personal Banking impaired loans and on Commercial Banking impaired loans as well as on impaired credit card receivables were below pre-pandemic levels, in particular due to fewer cases of insolvency and to the various assistance measures deployed by governments.

 

For the year ended October 31, 2021, net income generated by the Personal and Commercial segment totalled $1,266 million, up from $770 million in fiscal 2020. This increase was essentially due to the impacts of COVID-19 on macroeconomic factors, which affected the provisions for credit losses recorded by the Bank in fiscal 2021 and fiscal 2020, and to a $229 million year-over-year increase in the segment's total revenues. The segment's income before provisions for credit losses and income taxes totalled $1,728 million in fiscal 2021, up 10% year over year. Personal Banking's total revenues were up, mainly due to loan and deposit growth (tempered by the impact of lower interest rates on the net interest margin) and to increases in insurance revenues, internal commission revenues related to the distribution of Wealth Management products, and credit card revenues. Commercial Banking's total revenues were also up, rising 11% owing to loan and deposit growth (tempered by a narrowing of the net interest margin) as well as to increases in revenues from bankers' acceptances, in revenues from derivative financial instruments, and in revenues from credit fees.

 

For fiscal 2021, Personal and Commercial's non-interest expenses stood at $1,958 million, a 3% year-over-year increase that was mainly attributable to increases in operations support charges and amortization expense as well as to higher compensation and employee benefits. These increases were partly offset by a decrease in certain variable expenses. At 53.1% for the year ended October 31, 2021, the efficiency ratio improved by 1.6 percentage points versus fiscal 2020. For fiscal 2021, the segment recorded $6 million in provisions for credit losses compared to $517 million in fiscal 2020. This decrease stems from reversals of allowances for credit losses on non-impaired loans given improvements in the macroeconomic outlook and in credit conditions in fiscal 2021, whereas substantially higher provisions for credit losses had been recorded in fiscal 2020 to reflect a significant deterioration in the macroeconomic outlook caused by COVID-19. In addition, the provisions for credit losses on Personal Banking impaired loans and on Commercial Banking impaired loans as well as on impaired credit card receivables were below pre-pandemic levels, in particular due to fewer cases of insolvency and to the various assistance measures deployed by governments.

 

Wealth Management

 

(millions of Canadian dollars)			Quarter ended October 31								Year ended October 31
			2021			2020(1)			% Change		2021			2020(1)			% Change
Operating results
Net interest income			115			107			7		448			442			1
Fee-based revenues			357			281			27		1,316			1,087			21
Transaction-based and other revenues			90			79			14		405			330			23
Total revenues			562			467			20		2,169			1,859			17
Non-interest expenses			337			284			19		1,277			1,125			14
Income before provisions for credit losses and income taxes			225			183			23		892			734			22
Provisions for credit losses			1			1			−		1			7			(86)
Income before income taxes			224			182			23		891			727			23
Income taxes			59			48			23		236			192			23
Net income			165			134			23		655			535			22
Average assets(2)			7,699			6,024			28		7,146			5,917			21
Average loans and acceptances(2)			6,556			4,890			34		5,998			4,776			26
Net impaired loans(2)			16			2					16			2
Average deposits(2)			33,659			35,847			(6)		33,934			34,507			(2)
Assets under administration(2)			651,530			509,071			28		651,530			509,071			28
Assets under management(2)			117,186			87,585			34		117,186			87,585			34
Efficiency ratio(2)			60.0	%		60.8	%				58.9	%		60.5	%

 

(1)    For the quarter and year ended October 31, 2020, certain amounts have been reclassified.

(2)    For additional information on supplementary financial measures composition, see the Glossary section on pages 123 to 126 of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

 

In the Wealth Management segment, net income totalled $165 million in the fourth quarter of 2021, a 23% increase from $134 million in the fourth quarter of 2020. The segment's fourth-quarter total revenues amounted to $562 million, up $95 million or 20% from $467 million in the fourth quarter of 2020. This increase was driven by a 27% increase in fee-based revenues given growth in average assets under administration and average assets under management as a result of net inflows into various solutions and of stronger stock market performance in fiscal 2021 and was also driven by growth in transaction-based and other revenues, which rose 14% owing to an increase in commissions on trading volume and new issuances in the fourth quarter of 2021. The segment's fourth-quarter net interest income was up 7% due to loan growth.

 

For the fourth quarter of 2021, Wealth Management's non-interest expenses stood at $337 million, a 19% year-over-year increase that was attributable to higher compensation and employee benefits, notably the variable compensation associated with the segment's revenue growth, as well as to higher external management fees and higher operations support charges. At 60.0%, the segment's fourth-quarter efficiency ratio improved by 0.8 percentage points compared to the fourth quarter of 2020. The segment's provisions for credit losses remained stable in the fourth quarters of 2021 and 2020.

 

For the year ended October 31, 2021, the Wealth Management segment's net income totalled $655 million, up 22% from $535 million in fiscal 2020. The segment's fiscal 2021 total revenues amounted to $2,169 million, up 17% from $1,859 million in fiscal 2020. Fiscal 2021 fee-based revenues rose 21% year over year thanks to growth in average assets under administration and average assets under management as a result of net inflows into various solutions and of stronger stock market performance in fiscal 2021. Fiscal 2021 transaction-based and other revenues grew 23% year over year owing to an increase in trading volume resulting from stronger stock market activity during this period. As for the segment's fiscal 2021 net interest income, it was up $6 million year over year owing to growth in loans, tempered by a lower deposit margin. For fiscal 2021, Wealth Management's non-interest expenses stood at $1,277 million compared to $1,125 million in fiscal 2020, an increase attributable to higher compensation and employee benefits, notably the variable compensation associated with revenue growth, as well as to higher external management fees and higher operations support charges related to the segment's business growth and initiatives. At 58.9%, the segment's efficiency ratio for the year ended October 31, 2021 improved from 60.5% in fiscal 2020. Wealth Management recorded $1 million in provisions for credit losses for fiscal 2021, whereas, in fiscal 2020, it had recorded $7 million to reflect a deterioration in the macroeconomic outlook caused by COVID-19.

 

Financial Markets 

 

(taxable equivalent basis)(1)
(millions of Canadian dollars)			Quarter ended October 31								Year ended October 31
			2021			2020(2)			% Change		2021			2020(2)			% Change
Operating results
Global markets
	Equities		175			148			18		685			706			(3)
	Fixed-income		58			114			(49)		357			430			(17)
	Commodities and foreign exchange		34			19			79		128			132			(3)
			267			281			(5)		1,170			1,268			(8)
Corporate and investment banking			215			214			−		976			786			24
Total revenues on a taxable equivalent basis			482			495			(3)		2,146			2,054			4
Non-interest expenses			206			185			11		880			812			8
Income before provisions for credit losses and income taxes
	on a taxable equivalent basis		276			310			(11)		1,266			1,242			2
Provisions for credit losses			(7)			27			(126)		10			239			(96)
Income before income taxes on a taxable equivalent basis			283			283			−		1,256			1,003			25
Income taxes on a taxable equivalent basis			75			75			−		333			265			26
Net income			208			208			−		923			738			25
Average assets(3)			151,047			132,067			14		150,147			123,943			21
Average loans and acceptances(3) (Corporate Banking only)			18,834			18,589			1		18,518			18,782			(1)
Net impaired loans(3)			9			21			(57)		9			21			(57)
Average deposits(3)			46,581			35,098			33		43,397			35,433			22
Efficiency ratio on a taxable equivalent basis(4)			42.7	%		37.4	%				41.0	%		39.5	%

 

(1)    For additional information on non-GAAP financial measures, see the Financial Reporting Method section on pages 2 to 5.

(2)    For the quarter and year ended October 31, 2020, certain amounts have been reclassified.

(3)    For additional information on supplementary financial measures composition, see the Glossary section on pages 123 to 126 of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

(4)    For additional information on non-GAAP ratios, see the Financial Reporting Method section and the Glossary section on pages 18 to 21 and on pages 123 to 126, respectively, of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

 

In the Financial Markets segment, net income totalled $208 million in the fourth quarter of 2021, stable compared to the fourth quarter of 2020. Fourth-quarter total revenues on a taxable equivalent basis amounted to $482 million, down $13 million or 3% from $495 million in the fourth quarter of 2020. Fourth-quarter global markets revenues were down 5% year over year, as revenues from fixed-income securities declined 49%, partly offset by increases in revenues from equities and in revenues from commodities and foreign exchange activities, which rose 18% and 79%, respectively. As for fourth-quarter corporate and investment banking revenues, they remained stable year over year, as higher revenues generated by capital markets activities as well as higher revenues from banking services were offset by lower revenues from merger and acquisition activities.

 

The segment's fourth-quarter non-interest expenses stood at $206 million, an 11% year-over-year increase that was essentially due to increases in compensation and employee benefits, in technology investment expenses, and in operations support charges. At 42.7%, the segment's fourth-quarter efficiency ratio on a taxable equivalent basis compares to 37.4% in the same quarter of 2020. For the fourth quarter of 2021, Financial Markets recorded $7 million in recoveries of credit losses compared to $27 million in provisions for credit losses recorded in the fourth quarter of 2020. This decrease was due to reversals of allowances for credit losses on non-impaired loans in the fourth quarter of 2021 given a more favourable macroeconomic outlook and improved credit conditions. The fourth-quarter provisions for credit losses on impaired loans were up $8 million compared to fourth-quarter 2020.

 

For the year ended October 31, 2021, net income generated by Financial Markets totalled $923 million, a 25% year-over-year increase arising from a decrease in provisions for credit losses and from growth in total revenues. The segment's income before provisions for credit losses and income taxes on a taxable equivalent basis totalled $1,266 million in fiscal 2021, up $24 million or 2% from fiscal 2020. Its fiscal 2021 total revenues on a taxable equivalent basis amounted to $2,146 million, up $92 million or 4% from $2,054 million in fiscal 2020. Global markets revenues declined 8% year over year given decreases across all types of revenues, which had benefitted from a favourable context in fiscal 2020. For fiscal 2021, the segment's corporate and investment banking revenues grew 24% year over year, mainly due to increases in revenues from capital markets activities, in revenues from merger and acquisition activities, and in banking service revenues.

 

The segment's fiscal 2021 non-interest expenses rose 8% year over year, essentially due to higher compensation and employee benefits, notably the variable compensation associated with revenue growth, as well as to higher technology investment expenses and higher operations support charges. The segment's fiscal 2021 efficiency ratio on a taxable equivalent basis was 41.0% versus 39.5% in fiscal 2020. Financial Markets recorded $10 million in provisions for credit losses for fiscal 2021 compared to $239 million in fiscal 2020. This decrease was due to reversals of allowances for credit losses on non-impaired loans in fiscal 2021 given improved macroeconomic outlook and credit conditions, whereas in fiscal 2020, substantial credit loss provisions had been recorded to reflect a significant deterioration in the macroeconomic outlook caused by COVID-19. For fiscal 2021, the provisions for credit losses on impaired loans were up $7 million year over year.

 

U.S. Specialty Finance and International (USSF&I)

 

(millions of Canadian dollars)			Quarter ended October 31								Year ended October 31
			2021			2020			% Change		2021			2020			% Change
Total revenues
	Credigy		100			122			(18)		486			406			20
	ABA Bank		139			111			25		510			410			24
	International		3			(1)					5			4
			242			232			4		1,001			820			22
Non-interest expenses
	Credigy		30			38			(21)		139			144			(3)
	ABA Bank		45			41			10		173			171			1
	International		1			1					3			4
			76			80			(5)		315			319			(1)
Income before provisions for credit losses and income taxes			166			152			9		686			501			37
Provisions for credit losses
	Credigy		−			12					(41)			59
	ABA Bank		3			5			(40)		26			21			24
			3			17					(15)			80
Income before income taxes			163			135			21		701			421			67
Income taxes
	Credigy		15			15					86			43
	ABA Bank		19			14					60			26
			34			29					146			69
Net income
	Credigy		55			57			(4)		302			160			89
	ABA Bank		72			51			41		251			192			31
	International		2			(2)					2			−
			129			106			22		555			352			58
Non-controlling interests			−			11					−			34
Net income attributable to the Bank's shareholders and   holders of other equity instruments			129			95			36		555			318			75
Average assets(1)			17,143			15,272			12		16,150			14,336			13
Average loans and receivables(1)			13,479			11,827			14		12,558			11,340			11
Net impaired loans - Stage 3(1)			40			30			33		40			30			33
Purchased or originated credit-impaired (POCI) loans			464			855			(46)		464			855			(46)
Average deposits(1)			7,351			5,791			27		6,699			5,006			34
Efficiency ratio(1)			31.4	%		34.5	%				31.5	%		38.9	%

 

(1)    For additional information on supplementary financial measures composition, see the Glossary section on pages 123 to 126 of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

 

In the USSF&I segment, net income totalled $129 million in the fourth quarter of 2021 compared to $106 million in the fourth quarter of 2020, a 22% increase arising from business growth at the ABA Bank subsidiary. The segment's fourth-quarter total revenues amounted to $242 million, up $10 million or 4% from $232 million in the fourth quarter of 2020. This revenue growth came from a $28 million increase in ABA Bank's revenues, partly offset by a $22 million decrease in Credigy's revenues. For the year ended October 31, 2021, the segment's net income totalled $555 million, a 58% increase from $352 million in fiscal 2020.

 

Credigy

For the fourth quarter of 2021, the Credigy subsidiary's net income totalled $55 million, a $2 million decrease from the same quarter in 2020. Credigy's fourth‑quarter total revenues amounted to $100 million, down from $122 million in the fourth quarter of 2020, mainly due to lower interest rates, to the fair value remeasurement of certain portfolios, and to exchange rate movements, partly offset by growth in loan volumes. Fourth-quarter non-interest expenses stood at $30 million, down $8 million as a result of lower service charges. Credigy's fourth-quarter provisions for credit losses were down $12 million year over year, resulting in part from a remeasurement of POCI loan portfolios and from a decrease in the provisions for credit losses on impaired loans.

 

For the year ended October 31, 2021, the Credigy subsidiary's net income totalled $302 million, up $142 million year over year. Its fiscal 2021 total revenues amounted to $486 million, up from $406 million in fiscal 2020. Growth in loan portfolios and solid performance in certain portfolios drove up net interest income, while an increase in non-interest income was generated by a $26 million gain realized in the first quarter of 2021 following a disposal of loan portfolios and by a favourable impact of remeasuring certain loan portfolios at fair value, whereas the impacts of the COVID-19 pandemic had an unfavourable impact on the performance of these same portfolios in fiscal 2020. Credigy's fiscal 2021 non-interest expenses were down $5 million year over year given a decrease in service charges, partly offset by an increase in variable compensation. Credigy's fiscal 2021 provisions for credit losses were down $100 million year over year, resulting from a more favourable macroeconomic outlook, a remeasurement of POCI loan portfolios, and a decrease in the provisions for credit losses on impaired loans.

 

During the year ended October 31, 2021, the Bank acquired the entire remaining non-controlling interest in the Credigy subsidiary. For additional information, see Note 31 to the audited annual consolidated financial statements for the year ended October 31, 2021.

 

ABA Bank

For the fourth quarter of 2021, the ABA Bank subsidiary's net income totalled $72 million, up $21 million or 41% from the fourth quarter of 2020. ABA Bank's fourth-quarter total revenues also increased, rising 25% year over year due to sustained loan and deposit growth, partly offset by lower interest rates and exchange rate movements. The subsidiary's fourth-quarter non-interest expenses stood at $45 million, up $4 million from the fourth quarter of 2020. The subsidiary recorded $3 million in provisions for credit losses during the fourth quarter of 2021 compared to $5 million in the same quarter of 2020, a decrease that stems essentially from provisions for credit losses on non-impaired loans.

 

For the year ended October 31, 2021, ABA Bank's net income totalled $251 million, up 31% from fiscal 2020. Growth in the subsidiary's business activities, mainly in the form of sustained loan and deposit growth, drove total revenues up 24% year over year. However, this growth was tempered by lower interest rates and by exchange rate movement. At $173 million, ABA Bank's fiscal 2021 non-interest expenses remained relatively stable compared with fiscal 2020, as higher variable compensation was offset by exchange rate movement. The subsidiary recorded $26 million in provisions for credit losses in fiscal 2021, up $5 million year over year, as provisions for credit losses on non-impaired loans rose, essentially due to an anticipated impact on the subsidiary's clients of an increase in COVID-19 cases in fiscal 2021.

 

For fiscal 2021, the subsidiary's effective tax rate increased year over year, mainly due to tax incentive measures granted by the Cambodian government and recorded during the second quarter of 2020.

 

Other

 

(taxable equivalent basis)(1)
(millions of Canadian dollars)		Quarter ended October 31				Year ended October 31
		2021		2020(2)		2021		2020(2)
Operating results
Net interest income on a taxable equivalent basis		(69)		(55)		(200)		(177)
Non-interest income on a taxable equivalent basis		90		29		314		179
Total revenues on a taxable equivalent basis		21		(26)		114		2
Non-interest expenses		136		234		423		397
Income before provisions for credit losses and income taxes on a taxable equivalent basis		(115)		(260)		(309)		(395)
Provisions for credit losses		−		(2)		−		3
Income before income taxes on a taxable equivalent basis		(115)		(258)		(309)		(398)
Income taxes (recovery) on a taxable equivalent basis		(36)		(53)		(87)		(86)
Net loss		(79)		(205)		(222)		(312)
Non-controlling interests		−		(9)		−		8
Net loss attributable to the Bank's shareholders and holders of other equity instruments		(79)		(196)		(222)		(320)
Specified items after income taxes(1)		(7)		(123)		(7)		(133)
Net loss excluding specified items(1)		(72)		(82)		(215)		(179)
Specified items after income taxes and non-controlling interests		(7)		(113)		(7)		(123)
Net loss attributable to the Bank's shareholders and holders of other equity instruments   excluding specified items		(72)		(83)		(215)		(197)
Average assets(3)		61,533		65,544		62,503		56,665

 

(1)    For additional information on non-GAAP financial measures, see the Financial Reporting Method section on pages 2 to 5.

(2)    For the quarter and year ended October 31, 2020, certain amounts have been reclassified.

(3)    For additional information on supplementary financial measures composition, see the Glossary section on pages 123 to 126 of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

 

For the Other heading of segment results, there was a net loss of $79 million in the fourth quarter of 2021 compared to a net loss of $205 million in the same quarter of 2020. The lower loss came mainly from specified items, which had had a $123 million unfavourable impact in the fourth quarter of 2020 compared to a $7 million unfavourable impact in the fourth quarter of 2021. This change in net loss was also due to higher gains on investments recorded in the fourth quarter of 2021, a $33 million non-taxable gain on remeasurement of the previously held equity interest in Flinks, and a decrease in the expenses incurred by the Bank to protect the health and safety of employees and clients in response to COVID-19, which were higher in the fourth quarter of 2020. These items were partly offset by an increase in technology investments related the Bank's transformation plan and business development as well as by a loss of $30 million ($26 million net of income taxes) on a fair value remeasurement of the Bank's equity interest in AfrAsia. The specified items, net of income taxes, recorded in the fourth quarter of 2021 included $7 million in impairment losses on intangible assets, whereas in the fourth quarter of 2020, they had included a $36 million foreign currency translation loss on a disposal of Credigy subsidiaries in Brazil, $52 million in impairment losses on premises and equipment and on intangible assets, and $35 million in severance pay. The fourth-quarter net loss excluding specified items was $72 million compared to an $82 million net loss in the fourth quarter of 2020.

 

For the year ended October 31, 2021, net loss stood at $222 million compared to a net loss of $312 million in fiscal 2020. This lower net loss was due to the same reasons as those provided for the quarter as well as the lower revenues from Treasury activities in fiscal 2021 compared to fiscal 2020, in part due to stock market volatility in fiscal 2020. In addition, non-interest expenses were also up, arising from higher variable compensation associated with revenue growth. The specified items, net of income taxes, recorded in fiscal 2021 included $7 million in impairment losses on intangible assets. In fiscal 2020, specified items, net of income taxes, had included a $36 million foreign currency translation loss on the disposal of Credigy subsidiaries in Brazil, $52 million in impairment losses on premises and equipment and on intangible assets, $35 million in severance pay, and a $10 million charge related to Maple.

 

Consolidated Balance Sheet

 

Consolidated Balance Sheet Summary

 

(millions of Canadian dollars)			As at October 31, 2021		As at October 31, 2020		% Change
Assets
Cash and deposits with financial institutions			33,879		29,142		16
Securities			106,304		102,131		4
Securities purchased under reverse repurchase agreements and securities borrowed			7,516		14,512		(48)
Loans and acceptances, net of allowances			182,689		164,740		11
Other			25,407		21,100		20
			355,795		331,625		7
Liabilities and equity
Deposits			240,938		215,878		12
Other			95,233		98,589		(3)
Subordinated debt			768		775		(1)
Equity attributable to the Bank's shareholders and holders of other equity instruments			18,853		16,380		15
Non-controlling interests			3		3		−
			355,795		331,625		7

 

Assets

As at October 31, 2021, the Bank had total assets of $355.8 billion, a $24.2 billion or 7% increase from $331.6 billion as at October 31, 2020. Cash and deposits with financial institutions, totalling $33.9 billion as at October 31, 2021, increased by $4.8 billion, mainly due to deposits with the Bank of Canada and the U.S. Federal Reserve. The high level of cash and deposits with financial institutions came partly from the liquidity obtained as part of financing initiatives deployed by the Canadian government in 2020, through the Bank of Canada, to support the Canadian financial system in response to COVID-19.

 

Since October 31, 2020, securities rose $4.2 billion due to a $6.5 billion or 8% increase in securities at fair value through profit or loss, essentially equity securities, partly offset by a $2.3 billion decrease in securities other than those measured at fair value through profit or loss. Securities purchased under reverse repurchase agreements and securities borrowed decreased by $7.0 billion, mainly related to activities in the Financial Markets segment and Treasury. 

 

Totalling $182.7 billion as at October 31, 2021, loans and acceptances, net of allowances for credit losses, rose $18.0 billion or 11% since October 31, 2020. The following table provides a breakdown of the main loan and acceptance portfolios.

 

(millions of Canadian dollars)			As at October 31, 2021		As at October 31, 2020
Loans and acceptances
Residential mortgage and home equity lines of credit			99,146		89,097
Personal			14,449		13,475
Credit card			2,150		2,038
Business and government			67,942		61,288
			183,687		165,898
Allowances for credit losses			(998)		(1,158)
			182,689		164,740

 

Residential mortgages (including home equity lines of credit) rose $10.0 billion or 11% since October 31, 2020 mainly due to sustained demand for mortgage credit in the Personal and Commercial segment. Personal loans rose since October 31, 2020, due to business growth at Personal Banking, in the Wealth Management segment, and at the ABA Bank subsidiary, tempered somewhat by a decrease in the outstanding loan portfolios of the Credigy subsidiary following repayments and the disposal of loan portfolios. As for credit card receivables, they totalled $2.2 billion, rising $0.1 billion since October 31, 2020. Loans and acceptances to business and government were up $6.6 billion or 11% since October 31, 2020 owing to business growth in Commercial Banking and at Credigy.

 

Impaired loans include loans classified in Stage 3 of the expected credit loss model and the purchased or originated credit-impaired (POCI) loans of the Credigy subsidiary. As at October 31, 2021, gross impaired loans excluding POCI loans stood at $662 million compared to $817 million as at October 31, 2020. Net impaired loans excluding POCI loans stood at $283 million as at October 31, 2021 compared to $465 million as at October 31, 2020, a $182 million decrease related to decreases in net impaired loans in the Personal Banking and Commercial Banking portfolios as well as the loan portfolios of the Financial Markets segment. This decrease was partly offset by an increase in the net impaired loans of the Wealth Management segment and of the ABA Bank subsidiary. Gross POCI loans stood at $464 million as at October 31, 2021, whereas they had stood at $855 million as at October 31, 2020 as a result of repayments and maturities of certain portfolios.

 

At $25.4 billion as at October 31, 2021, other assets increased by $4.3 billion since October 31, 2020. This increase came mainly from a $3.1 billion increase in derivative financial instruments related to the activities of the Financial Markets segment as well as from a $0.6 billion increase in defined benefit pension plan assets.

 

 

Liabilities

As at October 31, 2021, the Bank had total liabilities of $336.9 billion compared to $315.2 billion as at October 31, 2020. 

 

The Bank's total deposit liability stood at $240.9 billion as at October 31, 2021 compared to $215.9 billion as at October 31, 2020, rising $25.0 billion or 12% since October 31, 2020. At $70.1 billion as at October 31, 2021, personal deposits increased $2.6 billion since October 31, 2020. This increase was driven by business growth in Personal Banking, in the Financial Markets segment, and at the ABA Bank subsidiary, tempered by lower deposits in the Wealth Management segment.

 

Business and government deposits totalled $167.9 billion as at October 31, 2021, rising $24.1 billion since October 31, 2020. This increase came from the funding activities of the Financial Markets segment and of Treasury, including $3.5 billion in deposits subject to bank recapitalization (bail-in) conversion regulations, as well as from Commercial Banking activities. At $3.0 billion as at October 31, 2021, deposits from deposit-taking institutions decreased $1.6 billion since October 31, 2020.

 

As at October 31, 2021, other liabilities stood at $95.2 billion, declining $3.4 billion or 3% since October 31, 2020, as a $3.9 billion increase in obligations related to securities sold short and a $6.5 billion increase in derivative financial instruments were more than offset by a $16.6 billion decrease in obligations related to securities sold under repurchase agreements and securities loaned.

 

Equity

As at October 31, 2021, equity attributable to the Bank's shareholders and holders of other equity instruments totalled $18.9 billion, rising $2.5 billion since October 31, 2020. This increase was mainly due to net income net of dividends, by the $500 million issuance of Limited Recourse Capital Notes (LRCN) - Series 2, by the issuance of common shares under the Stock Option Plan, by remeasurements of pension plans and other post-employment benefit plans, and by gains on cash flow hedges in accumulated other comprehensive income. These increases were partly offset by unrealized foreign currency translation losses on investments in foreign operations and by the $800 million in redemptions of the Series 34 and Series 36 preferred shares.

 

 

Acquisition

 

Acquisition of Flinks Technology Inc.

On September 8, 2021, the Bank finalized the acquisition of Flinks Technology Inc. (Flinks), a leading fintech company specialized in financial data aggregation and distribution, in which the Bank had already been holding a 30.2% equity interest. Flinks provides services to a wide North American fintech ecosystem and offers attractive data technology solutions. The acquisition strategically positions the Bank in a high-growth market to continue to enhance customer experiences and benefit from future technology-driven innovations. At the time of acquisition, the amount of which was $73 million in cash for voting preferred shares, the Bank was holding an 82.9% equity interest in Flinks, thereby giving it control thereover. Immediately after the acquisition, the Bank made an additional $30 million investment in voting right preferred shares, giving the Bank an 85.9% equity interest in Flinks. The amount of the $73 million purchase price, of the fair value of the previously held equity interest, and of the estimated value of the non-controlling interest established on the acquisition date, exceeded the fair value of the net assets acquired by $101 million. This excess amount has been recorded on the Consolidated Balance Sheet as goodwill and mainly represents the expected future profits of Flinks given its favourable position in this growth market. The goodwill is not deductible for tax purposes. The previously held equity interest, accounted for as an associate, was remeasured at fair value, generating a $33 million non-taxable remeasurement gain that was reported in the Non-interest income - Other item of the Consolidated Statement of Income.

 

Acquisition of the Entire Remaining Non-Controlling Interest in the Credigy Ltd. Subsidiary

On December 15, 2020, the Bank acquired the entire remaining non-controlling interest in the Credigy Ltd. subsidiary following a decision by the non‑controlling shareholders to exercise their put options for an amount of $300 million according to an agreement reached in 2013. Following this transaction, Credigy Ltd. became a wholly owned subsidiary of the Bank.

 

 

Event After the Consolidated Balance Sheet Date

 

Repurchase of common shares

On November 30, 2021, the Bank's Board of Directors approved a normal course issuer bid, beginning December 10, 2021, to repurchase for cancellation up to 7,000,000 common shares (representing approximately 2% of its outstanding common shares) over the 12-month period ending December 9, 2022. 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. This normal course issuer bid is subject to the approval of OSFI and the Toronto Stock Exchange (TSX).

 

Income Taxes

 

In June 2021, the Bank was reassessed by the Canada Revenue Agency (CRA) for additional income tax and interest of approximately $115 million (including estimated provincial tax and interest) in respect of certain Canadian dividends received by the Bank during 2016.   

 

In prior fiscal years, the Bank had been reassessed for additional income tax and interest of approximately $610 million (including provincial tax and interest) in respect of certain Canadian dividends received by the Bank during the 2015, 2014, 2013 and 2012 taxation years. 

 

In the reassessments, the CRA alleges that the dividends were received as part of a "dividend rental arrangement".

 

The CRA may issue reassessments to the Bank for taxation years subsequent to 2016 in regard to activities similar to those that were the subject of the above‑mentioned reassessments. The Bank remains confident that its tax position was appropriate and intends to vigorously defend its position. As a result, no amount has been recognized in the consolidated financial statements as at October 31, 2021.

 

 

Litigation

 

In the normal course of business, the Bank and its subsidiaries are involved in various claims relating, among other matters, to loan portfolios, investment portfolios, and supplier agreements, including court proceedings, investigations or claims of a regulatory nature, class actions or other legal remedies of varied natures.

 

More specifically, the Bank is involved as a defendant in class actions instituted by consumers contesting, inter alia, certain transaction fees or who wish to avail themselves of certain legislative provisions relating to consumer protection. The recent developments in the main legal proceedings involving the Bank are as follows:

 

Watson

In 2011, a class action was filed in the Supreme Court of British Columbia against Visa Corporation Canada (Visa) and Mastercard International Incorporated (Mastercard) (the Networks) as well as National Bank and a number of other Canadian financial institutions. A similar action was also initiated in Quebec, Ontario, Alberta and Saskatchewan. In each of the actions, the Networks and financial institutions are alleged to have been involved in a price-fixing system to maintain and increase the fees paid by merchants on transactions executed using the credit cards of the Networks. In so doing, they would notably be in breach of the Competition Act. An unspecified amount of compensatory and punitive damages is being claimed. In 2017, a settlement was reached with the plaintiffs; in 2018 it was approved by the trial courts in each of the five jurisdictions where the action was initiated. The rulings approving the settlement were the subject of appeal proceedings in all jurisdictions. These appeal proceedings were all rejected during the year ended October 31, 2021, thereby confirming approval of the settlement reached in 2017 and ending the Bank's involvement in the class action.

 

Defrance

On January 21, 2019, the Quebec Superior Court authorized a class action against the National Bank and several other Canadian financial institutions. The originating application was served to the Bank on April 23, 2019. The class action was initiated on behalf of consumers residing in Quebec. The plaintiffs allege that non-sufficient funds charges, billed by all of the defendants when a payment order is refused due to non-sufficient funds, are illegal and prohibited by the Consumer Protection Act. The plaintiffs are claiming, in the form of damages, the repayment of these charges as well as punitive damages.

 

It is impossible to determine the outcome of the claims instituted or which may be instituted against the Bank and its subsidiaries. The Bank estimates, based on the information at its disposal, that while the amount of contingent liabilities pertaining to these claims, taken individually or in the aggregate, could have a material impact on the Bank's consolidated results of operations for a particular period, it would not have a material adverse impact on the Bank's consolidated financial position.

 

Capital Management

 

As at October 31, 2021, the Bank's CET1, Tier 1, and Total capital ratios were, respectively, 12.4%, 15.0% and 15.9%, i.e., above the regulatory requirements, compared to ratios of, respectively, 11.8%, 14.9% and 16.0% as at October 31, 2020. The increase in the CET1 capital ratio since October 31, 2020 was essentially due to net income net of dividends, common share issuances under the Stock Option Plan, and remeasurements of pension plans and other post‑employment benefit plans. These factors were partly offset by organic growth in RWA, by the impact of the transitional measures applicable to ECL provisioning, of which the scaling factor decreased to 50% from 70%, by the impact of unwinding the temporary reduction of stressed VaR multipliers, and by the impact of the acquisition of Flinks. The stability seen in the Tier 1 capital ratio and in the Total capital ratio is explained essentially by redemptions of the Series 34 and Series 36 preferred shares, tempered by the above-mentioned factors and by the issuance of Limited Recourse Capital Notes (LRCN) - Series 2. As at October 31, 2021, the leverage ratio was 4.4%, stable compared to October 31, 2020. The growth in Tier 1 capital, explained by the above-mentioned factors, and significant growth in total exposure were partly offset by the temporary measures announced by OSFI with respect to the exclusion of exposures from central bank reserves and sovereign-issued securities that qualify as high-quality liquid assets (HQLA) securities under the Liquidity Adequacy Requirements guideline.

 

Regulatory Capital and Ratios Under Basel III⁽¹⁾

 

(millions of Canadian dollars)			As at October 31, 2021						As at October 31, 2020
			Adjusted(2)						Adjusted(2)
Capital
	CET1		12,866			12,973			10,924			11,167
	Tier 1		15,515			15,622			13,869			14,112
	Total		16,643			16,643			15,167			15,167
Risk-weighted assets			104,358			104,358			94,808			94,808
Total exposure			351,160			351,160			321,038			321,038
Capital ratios
	CET1		12.3	%		12.4	%		11.5	%		11.8	%
	Tier 1		14.9	%		15.0	%		14.6	%		14.9	%
	Total		15.9	%		15.9	%		16.0	%		16.0	%
Leverage ratio			4.4	%		4.4	%		4.3	%		4.4	%

 

(1)      For additional information on capital management measures, see the Financial Reporting Method section on pages 18 to 21 of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

(2)      Adjusted capital and capital ratios do not take into account the transitional measure for provisioning expected credit losses. For additional information, see the section entitled COVID‑19 Pandemic - Key Measures Introduced by the Regulatory Authorities on page 17 of the 2021 Annual Report.

 

Dividends

On November 30, 2021, the Board of Directors declared regular dividends on the various series of first preferred shares and a dividend of 87 cents per common share, up 16 cents or 23%, payable on February 1, 2022 to shareholders of record on December 27, 2021.

Consolidated Balance Sheets

(unaudited) (millions of Canadian dollars)

 

					As at October 31, 2021		As at October 31, 2020
Assets
Cash and deposits with financial institutions					33,879		29,142
Securities
At fair value through profit or loss					84,811		78,326
At fair value through other comprehensive income					9,583		12,726
At amortized cost					11,910		11,079
					106,304		102,131
Securities purchased under reverse repurchase agreements
	and securities borrowed				7,516		14,512
Loans
Residential mortgage					72,542		64,959
Personal					41,053		37,613
Credit card					2,150		2,038
Business and government					61,106		54,422
					176,851		159,032
Customers' liability under acceptances					6,836		6,866
Allowances for credit losses					(998)		(1,158)
					182,689		164,740
Other
Derivative financial instruments					16,484		13,422
Investments in associates and joint ventures					225		409
Premises and equipment					1,216		1,155
Goodwill					1,504		1,414
Intangible assets					1,510		1,434
Other assets					4,468		3,266
					25,407		21,100
					355,795		331,625
Liabilities and equity
Deposits					240,938		215,878
Other
Acceptances					6,836		6,866
Obligations related to securities sold short					20,266		16,368
Obligations related to securities sold under repurchase agreements
	and securities loaned				17,293		33,859
Derivative financial instruments					19,367		12,923
Liabilities related to transferred receivables					25,170		22,855
Other liabilities					6,301		5,718
					95,233		98,589
Subordinated debt					768		775
Equity
Equity attributable to the Bank's shareholders and holders of other equity instruments
Preferred shares and other equity instruments					2,650		2,950
Common shares					3,160		3,057
Contributed surplus					47		47
Retained earnings					13,028		10,444
Accumulated other comprehensive income					(32)		(118)
					18,853		16,380
Non-controlling interests					3		3
					18,856		16,383
					355,795		331,625

Consolidated Statements of Income

(unaudited) (millions of Canadian dollars)

 

			Quarter ended October 31				Year ended October 31
			2021		2020		2021		2020
Interest income
Loans			1,369		1,375		5,460		5,915
Securities at fair value through profit or loss			263		239		1,092		1,140
Securities at fair value through other comprehensive income			44		66		181		224
Securities at amortized cost			43		42		178		211
Deposits with financial institutions			19		18		76		88
			1,738		1,740		6,987		7,578
Interest expense
Deposits			405		460		1,635		2,552
Liabilities related to transferred receivables			102		92		372		392
Subordinated debt			4		4		17		19
Other			37		60		180		360
			548		616		2,204		3,323
Net interest income(1)			1,190		1,124		4,783		4,255
Non-interest income
Underwriting and advisory fees			80		85		415		314
Securities brokerage commissions			50		43		238		204
Mutual fund revenues			149		124		563		477
Investment management and trust service fees			251		195		900		735
Credit fees			126		128		506		467
Card revenues			42		34		148		138
Deposit and payment service charges			70		68		274		262
Trading revenues (losses)			55		78		268		544
Gains (losses) on non-trading securities, net			20		28		151		93
Insurance revenues, net			33		30		131		128
Foreign exchange revenues, other than trading			45		39		202		164
Share in the net income of associates and joint ventures			6		5		23		28
Other			94		19		325		118
			1,021		876		4,144		3,672
Total revenues			2,211		2,000		8,927		7,927
Non-interest expenses
Compensation and employee benefits			754		721		3,027		2,713
Occupancy			75		74		299		291
Technology			227		273		821		805
Communications			11		14		53		58
Professional fees			75		68		246		244
Other			116		109		407		434
			1,258		1,259		4,853		4,545
Income before provisions for credit losses and income taxes			953		741		4,074		3,382
Provisions for credit losses			(41)		110		2		846
Income before income taxes			994		631		4,072		2,536
Income taxes			218		139		895		453
Net income			776		492		3,177		2,083
Net income attributable to
Preferred shareholders and holders of other equity instruments			26		31		123		118
Common shareholders			750		459		3,054		1,923
Bank shareholders and holders of other equity instruments			776		490		3,177		2,041
Non-controlling interests			−		2		−		42
			776		492		3,177		2,083
Earnings per share (dollars)
	Basic		2.22		1.37		9.06		5.73
	Diluted		2.19		1.36		8.96		5.70
Dividends per common share (dollars)			0.71		0.71		2.84		2.84

(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, 2021.

 

Consolidated Statements of Comprehensive Income

(unaudited) (millions of Canadian dollars)

 

					Quarter ended October 31				Year ended October 31
						2021		2020		2021		2020
Net income						776		492		3,177		2,083
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    in foreign operations			(37)		(9)		(314)		43
			Net foreign currency translation (gains) losses on investments in foreign operations
				reclassified to net income		16		56		16		56
			Impact of hedging net foreign currency translation gains (losses)			9		7		95		(14)
			Impact of hedging net foreign currency translation (gains) losses reclassified    to net income			−		(20)		−		(20)
						(12)		34		(203)		65
		Net change in debt securities at fair value through other comprehensive income
			Net unrealized gains (losses) on debt securities at fair value through other    comprehensive income			(13)		27		6		240
			Net (gains) losses on debt securities at fair value through other comprehensive
				income reclassified to net income		7		(22)		(34)		(155)
			Change in allowances for credit losses on debt securities at fair value through
				other comprehensive income reclassified to net income		(1)		1		(2)		2
						(7)		6		(30)		87
		Net change in cash flow hedges
			Net gains (losses) on derivative financial instruments designated as a cash flow hedge			129		26		280		(271)
			Net (gains) losses on designated derivative financial instruments reclassified    to net income			9		2		26		(6)
						138		28		306		(277)
		Share in the other comprehensive income of associates and joint ventures				−		1		−		3
	Items that will not be subsequently reclassified to net income
		Remeasurements of pension plans and other post-employment benefit plans				28		103		475		238
		Net gains (losses) on equity securities designated at fair value through   other comprehensive income				5		3		64		(2)
		Net fair value change attributable to the credit risk on financial liabilities
			designated at fair value through profit or loss			17		(28)		(12)		(44)
						50		78		527		192
Total other comprehensive income, net of income taxes						169		147		600		70
Comprehensive income						945		639		3,777		2,153
Comprehensive income attributable to
	Bank shareholders and holders of other equity instruments					945		627		3,790		2,099
	Non-controlling interests					−		12		(13)		54
						945		639		3,777		2,153

 

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 October 31						Year ended October 31
						2021		2020		2021		2020
Items that may be subsequently reclassified to net income
	Net foreign currency translation adjustments
		Net unrealized foreign currency translation gains (losses) on investments    in foreign operations				5		(10)		14		(13)
		Net foreign currency translation (gains) losses on investments in foreign operations   reclassified to net income				(2)		6		(2)		6
		Impact of hedging net foreign currency translation gains (losses)				2		2		24		(4)
		Impact of hedging net foreign currency translation (gains) losses reclassified    to net income				−		(18)		−		(18)
						5		(20)		36		(29)
	Net change in debt securities at fair value through other comprehensive income
		Net unrealized gains (losses) on debt securities at fair value through other    comprehensive income				(5)		10		2		86
		Net (gains) losses on debt securities at fair value through other comprehensive income
			reclassified to net income			2		(8)		(12)		(56)
		Change in allowances for credit losses on debt securities at fair value through
			other comprehensive income reclassified to net income			−		−		−		1
						(3)		2		(10)		31
	Net change in cash flow hedges
		Net gains (losses) on derivative financial instruments designated as cash flow hedges				47		10		100		(97)
		Net (gains) losses on designated derivative financial instruments reclassified    to net income				3		1		9		(2)
						50		11		109		(99)
	Share in the other comprehensive income of associates and joint ventures					−		−		−		1
Items that will not be subsequently reclassified to net income
	Remeasurements of pension plans and other post-employment benefit plans					10		38		170		86
	Net gains (losses) on equity securities designated at fair value through   other comprehensive income					3		1		24		−
	Net fair value change attributable to the credit risk on financial liabilities
		designated at fair value through profit or loss				6		(10)		(5)		(16)
						19		29		189		70
						71		22		324		(26)

 

Consolidated Statements of Changes in Equity

(unaudited) (millions of Canadian dollars)

 

			Year ended October 31
						2021		2020
Preferred shares and other equity instruments at beginning						2,950		2,450
Issuances of preferred shares and other equity instruments						500		500
Redemption of preferred shares and other equity instruments for cancellation						(800)		−
Preferred shares and other equity instruments at end						2,650		2,950
Common shares at beginning						3,057		2,949
Issuances of common shares pursuant to the Stock Option Plan						104		111
Repurchases of common shares for cancellation						−		(5)
Impact of shares purchased or sold for trading						(1)		2
Common shares at end						3,160		3,057
Contributed surplus at beginning						47		51
Stock option expense						11		9
Stock options exercised						(11)		(13)
Contributed surplus at end						47		47
Retained earnings at beginning						10,444		9,312
Net income attributable to the Bank's shareholders and holders of other equity instruments						3,177		2,041
Dividends on preferred shares and distributions on other equity instruments						(131)		(119)
Dividends on common shares						(958)		(953)
Premium paid on common shares repurchased for cancellation						−		(25)
Issuance expenses for shares and other equity instruments, net of income taxes						(4)		(5)
Remeasurements of pension plans and other post-employment benefit plans						475		238
Net gains (losses) on equity securities designated at fair value through other comprehensive income						64		(2)
Net fair value change attributable to the credit risk on financial liabilities
	designated at fair value through profit or loss					(12)		(44)
Impact of a financial liability resulting from put options written to non-controlling interests						(25)		−
Other						(2)		1
Retained earnings at end						13,028		10,444
Accumulated other comprehensive income at beginning						(118)		16
Net foreign currency translation adjustments						(190)		53
Net change in unrealized gains (losses) on debt securities at fair value through other comprehensive income						(30)		87
Net change in gains (losses) on cash flow hedges						306		(277)
Share in the other comprehensive income of associates and joint ventures						−		3
Accumulated other comprehensive income at end						(32)		(118)
Equity attributable to the Bank's shareholders and holders of other equity instruments						18,853		16,380
Non-controlling interests at beginning						3		358
Non-controlling interest from the Flinks Technology Inc. acquisition						3		−
Purchase of the non-controlling interest of the Credigy Ltd. subsidiary						10		−
Redemption of trust units issued by NBC Asset Trust						−		(350)
Net income attributable to non-controlling interests						−		42
Other comprehensive income attributable to non-controlling interests						(13)		12
Distributions to non-controlling interests						−		(59)
Non-controlling interests at end						3		3
Equity						18,856		16,383

 

 

Accumulated Other Comprehensive Income 

			As at October 31, 2021		As at October 31, 2020
Accumulated other comprehensive income
Net foreign currency translation adjustments			(129)		61
Net unrealized gains (losses) on debt securities at fair value through other comprehensive income			71		101
Net gains (losses) on instruments designated as cash flow hedges			23		(283)
Share in the other comprehensive income of associates and joint ventures			3		3
			(32)		(118)

Segment Disclosures

(unaudited) (millions of Canadian dollars)

 

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.

 

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

The Other heading reports on Treasury operations, liquidity management, Bank funding, asset and liability management, the activities of the Flinks subsidiary, certain specified items, and the unallocated portion of corporate units.  

 

Results by Business Segment

 

											Quarter ended October 31(1)
		Personal and Commercial				Wealth Management				Financial Markets					USSF&I			Other						Total
		2021		2020		2021		2020		2021		2020		2021		2020		2021		2020		2021		2020
Net interest income(2)		661		627		115		107		281		269		241		222		(108)		(101)		1,190		1,124
Non-interest income(2)(3)		284		254		447		360		201		226		1		10		88		26		1,021		876
Total revenues		945		881		562		467		482		495		242		232		(20)		(75)		2,211		2,000
Non-interest expenses(4)		503		476		337		284		206		185		76		80		136		234		1,258		1,259
Income before provisions for credit   losses and income taxes		442		405		225		183		276		310		166		152		(156)		(309)		953		741
Provisions for credit losses		(38)		67		1		1		(7)		27		3		17		−		(2)		(41)		110
Income before income taxes (recovery)		480		338		224		182		283		283		163		135		(156)		(307)		994		631
Income taxes (recovery)(2)		127		89		59		48		75		75		34		29		(77)		(102)		218		139
Net income		353		249		165		134		208		208		129		106		(79)		(205)		776		492
Non-controlling interests		−		−		−		−		−		−		−		11		−		(9)		−		2
Net income attributable
	to the Bank's shareholders and holders of other equity instruments	353		249		165		134		208		208		129		95		(79)		(196)		776		490
Average assets		134,335		119,504		7,699		6,024		151,047		132,067		17,143		15,272		61,533		65,544		371,757		338,411

 

											Year ended October 31(1)
		Personal and Commercial				Wealth Management				Financial Markets						USSF&I		Other						Total
		2021		2020		2021		2020		2021		2020		2021		2020		2021		2020		2021		2020
Net interest income(5)		2,583		2,445		448		442		1,226		946		907		807		(381)		(385)		4,783		4,255
Non-interest income(3)(5)		1,103		1,012		1,721		1,417		920		1,108		94		13		306		122		4,144		3,672
Total revenues		3,686		3,457		2,169		1,859		2,146		2,054		1,001		820		(75)		(263)		8,927		7,927
Non-interest expenses(4)		1,958		1,892		1,277		1,125		880		812		315		319		423		397		4,853		4,545
Income before provisions for credit    losses and income taxes		1,728		1,565		892		734		1,266		1,242		686		501		(498)		(660)		4,074		3,382
Provisions for credit losses		6		517		1		7		10		239		(15)		80		−		3		2		846
Income before income taxes (recovery)		1,722		1,048		891		727		1,256		1,003		701		421		(498)		(663)		4,072		2,536
Income taxes (recovery)(5)		456		278		236		192		333		265		146		69		(276)		(351)		895		453
Net income		1,266		770		655		535		923		738		555		352		(222)		(312)		3,177		2,083
Non-controlling interests		−		−		−		−		−		−		−		34		−		8		−		42
Net income attributable
	to the Bank's shareholders and holders of other equity instruments	1,266		770		655		535		923		738		555		318		(222)		(320)		3,177		2,041
Average assets		127,716		117,338		7,146		5,917		150,147		123,943		16,150		14,336		62,503		56,665		363,662		318,199

 

(1)    For the quarter and year ended October 31, 2020, certain amounts have been reclassified.

(2)    The Net interest income, Non-interest income and Income taxes (recovery) items of the business segments are presented on a taxable equivalent basis. Taxable equivalent basis is a calculation method that consists in grossing up certain tax-exempt income by the amount of income tax that would have otherwise been payable. For the business segments as a whole, Net interest income was grossed up by $39 million ($46 million in 2020), Non-interest income was grossed up by $2 million ($3 million in 2020), and an equivalent amount was recognized in Income taxes (recovery). The effect of these adjustments is reversed under the Other heading.

(3)    For the quarter and the year ended October 31, 2021, the Non-interest income item of the Other heading of segment results included a $33 million gain on the remeasurement of the previously held equity interest in Flinks and a $30 million loss related to the fair value measurement of the Bank's equity interest in AfrAsia. For the quarter and year ended October 31, 2020, for the Other heading of segment results, the Non-interest income item had included a foreign currency translation loss of $24 million following a disposal, through subsidiary Credigy Ltd., of two subsidiaries in Brazil.

(4)    For the quarter and year ended October 31, 2021, the Non-interest expenses item of the Other heading of segment results included $9 million in impairment losses on intangible assets related to technology developments. For the quarter and year ended October 31, 2020, the Non-interest expenses item of the Other heading of segment results had included $71 million in impairment losses on premises and equipment and on intangible assets related to computer equipment and technology developments and $48 million in severance pay. For the year ended October 31, 2020 the Non-interest expenses item had also included a $13 million charge related to Maple.

(5)    For the year ended October 31, 2021, Net interest income was grossed up by $181 million ($208 million in 2020), Non-interest income was grossed up by $8 million ($57 million in 2020), and an equivalent amount was recognized in Income taxes (recovery). The effect of these adjustments has been reversed under the Other heading.

 

Caution Regarding Forward-Looking Statements

 

From time to time, the Bank makes written forward-looking statements such as those contained in this document, in other filings with Canadian securities regulators, and in other communications. In addition, representatives of the Bank may make forward-looking statements orally to analysts, investors, the media and others. All such statements are made in accordance with applicable securities legislation in Canada and the United States. Forward-looking statements in this document may include, but are not limited to, statements with respect to the economy-particularly the Canadian and U.S. economies-market changes, the Bank's objectives, outlook and priorities for fiscal year 2022 and beyond, the strategies or actions that will be taken to achieve them, expectations for the Bank's financial condition, the regulatory environment in which it operates, the potential impacts of-and the Bank's response to-the COVID-19 pandemic, and certain risks it faces. These forward-looking statements are typically identified by verbs or words such as "outlook", "believe", "foresee", "forecast", "anticipate", "estimate", "project", "expect", "intend" and "plan", in their future or conditional forms, notably verbs such as "will", "may", "should", "could" or "would" as well as similar terms and expressions. Such forward-looking statements are made for the purpose of assisting the holders of the Bank's securities in understanding the Bank's financial position and results of operations as at and for the periods ended on the dates presented, as well as the Bank's vision, strategic objectives and its financial performance targets, and may not be appropriate for other purposes.

 

By their very nature, these forward-looking statements require assumptions to be made and involve inherent risks and uncertainties, both general and specific. Assumptions about the performance of the Canadian and U.S. economies in 2022, including in the context of the COVID-19 pandemic, and how that will affect the Bank's business are among the main factors considered in setting the Bank's strategic priorities and objectives, notably provisions for credit losses. In determining its expectations for economic conditions, both broadly and in the financial services sector in particular, the Bank primarily considers historical economic data provided by the governments of Canada, the United States and certain other countries in which the Bank conducts business, as well as their agencies.

 

There is a strong possibility that the Bank's express or implied predictions, forecasts, projections, expectations or conclusions will not prove to be accurate, that its assumptions may not be confirmed and that its vision, strategic objectives and financial performance targets will not be achieved. The Bank recommends that readers not place undue reliance on forward-looking statements, as a number of factors, many of which are beyond the Bank's control, including the impacts of the COVID-19 pandemic, could cause actual results to differ significantly from the expectations, estimates or intentions expressed in these forward-looking statements. These risk factors include credit risk, market risk, liquidity and funding risk, operational risk, regulatory compliance risk, reputation risk, strategic risk, environmental and social risk, and certain emerging risks or risks deemed significant, all of which are described in greater detail in the Risk Management section beginning on page 69 of the 2021 Annual Report. These risk factors also include, among others, the general economic environment and financial market conditions in Canada, the United States, and other countries where the Bank operates; exchange rate and interest rate fluctuations; higher funding costs and greater market volatility; changes made to fiscal, monetary and other public policies; changes made to regulations that affect the Bank's business; geopolitical and sociopolitical uncertainty; the transition to a low-carbon economy and the Bank's ability to satisfy stakeholder expectations on environmental and social issues; significant changes in consumer behaviour; the housing situation, real estate market, and household indebtedness in Canada; the Bank's ability to achieve its long-term strategies and key short-term priorities; the timely development and launch of new products and services; the Bank's ability to recruit and retain key personnel; technological innovation and heightened competition from established companies and from competitors offering non-traditional services; changes in the performance and creditworthiness of the Bank's clients and counterparties; the Bank's exposure to significant regulatory matters or litigation; changes made to the accounting policies used by the Bank to report financial information, including the uncertainty inherent to assumptions and critical accounting estimates; changes to tax legislation in the countries where the Bank operates, i.e., primarily Canada and the United States; changes made to capital and liquidity guidelines as well as to the presentation and interpretation thereof; changes to the credit ratings assigned to the Bank; potential disruption to key suppliers of goods and services to the Bank; potential disruptions to the Bank's information technology systems, including evolving cyberattack risk as well as identity theft and theft of personal information; and possible impacts of major events affecting the local and global economies, including international conflicts, natural disasters, and public health crises such as the COVID-19 pandemic. The foregoing list of risk factors is not exhaustive. Additional information about these risk factors is provided in the Risk Management section and in the COVID-19 Pandemic section of the 2021 Annual Report and may be updated in the quarterly shareholders' reports subsequently published. Investors and others who rely on the Bank's forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risks they entail. Except as required by law, the Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time, by it or on its behalf.