Regulatory Announcement

RNS Number: 8461O

National Bank of Canada

December 4, 2024

 

2024 Annual Financial Statements (Part 2)

National Bank of Canada (the "Bank") announces publication of its 2024 Annual Report, including the audited consolidated financial statements for the years ended 31 October 2024 and 2023, together with the notes thereto and independent auditor's report thereon (the "2024 Financial Statements"). The 2024 Financial Statements have been uploaded to the National Storage Mechanism and will shortly be available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and are available on the Bank's website as part of the 2024 Annual Report at https://www.nbc.ca/about-us/investors.html

To view the full PDF of the 2024 Financial Statements, the 2024 Annual Report and the 2024 Annual CEO and CFO Certifications, please click on the following links:

http://www.rns-pdf.londonstockexchange.com/rns/8421O_1-2024-12-4.pdf
http://www.rns-pdf.londonstockexchange.com/rns/8421O_2-2024-12-4.pdf
http://www.rns-pdf.londonstockexchange.com/rns/8421O_3-2024-12-4.pdf

 

Sensitivity Analysis of Allowances for Credit Losses on Non-Impaired Loans

 

Scenarios

The following table shows a comparison of the Bank's allowances for credit losses on non-impaired loans (Stages 1 and 2) as at October 31, 2024 based on the probability weightings of three scenarios with allowances for credit losses resulting from simulations of each scenario weighted at 100%.

 

			Allowances for credit losses on non-impaired loans
Balance as at October 31, 2024			1,115
Simulations
	100% upside scenario		725
	100% base scenario		860
	100% downside scenario		1,469

 

Migration

The following table shows a comparison of the Bank's allowances for credit losses on non-impaired loans (Stages 1 and 2) as at October 31, 2024 with the estimated allowances for credit losses that would result if all these non-impaired loans were in Stage 1.

 

			Allowances for credit losses on non-impaired loans
Balance as at October 31, 2024			1,115
Simulation
	Non-impaired loans if they were all in Stage 1		891

 

Note 9 - Financial Assets Transferred But Not Derecognized

 

 

In the normal course of its business, the Bank enters into transactions in which it transfers financial assets such as securities or loans directly to third parties, in particular structured entities. According to the terms of some of those transactions, the Bank retains substantially all of the risks and rewards related to those financial assets. The risks include credit risk, interest rate risk, foreign exchange risk, prepayment risk, and other price risks, whereas the rewards include the income streams associated with the financial assets. As such, those financial assets are not derecognized and the transactions are treated as collateralized or secured borrowings. The nature of those transactions is described below.

 

Securities Sold Under Repurchase Agreements and Securities Loaned

When securities are sold under repurchase agreements and securities loaned under securities lending agreements, the Bank transfers financial assets to third parties in accordance with the standard terms for such transactions. These third parties may have an unlimited right to resell or repledge the financial assets received. If cash collateral is received, the Bank records the cash along with an obligation to return the cash, which is included in Obligations related to securities sold under repurchase agreements and securities loaned in the Consolidated Balance Sheet. Where securities are received as collateral, the Bank does not record the collateral in the Consolidated Balance Sheet.

 

Financial Assets Transferred to Structured Entities

Under the Canada Mortgage Bond (CMB) program, the Bank sells securities backed by insured residential mortgages and other securities to Canada Housing Trust (CHT), which finances the purchase through the issuance of insured mortgage bonds. Third-party CMB investors have legal recourse only to the transferred assets. The cash received for these transferred assets is treated as a secured borrowing, and a corresponding liability is recorded in Liabilities related to transferred receivables in the Consolidated Balance Sheet.

 

Note 9 - Financial Assets Transferred But Not Derecognized (cont.)

 

The following table provides additional information about the nature of the transferred financial assets that do not qualify for derecognition and the associated liabilities.

 

As at October 31			2024		2023
Carrying value of financial assets transferred but not derecognized
	Securities(1)		110,614		91,097
	Residential mortgages		24,015		23,227
			134,629		114,324
Carrying value of associated liabilities(2)			70,423		62,295
Fair value of financial assets transferred but not derecognized
	Securities(1)		110,614		91,098
	Residential mortgages		23,760		22,002
			134,374		113,100
Fair value of associated liabilities(2)			70,091		61,468

 

(1)       The amount related to the securities loaned is the maximum amount of Bank securities that can be lent. For obligations related to securities sold under repurchase agreements, the amount includes the Bank's own financial assets as well as those of third parties.

(2)       Associated liabilities include liabilities related to transferred receivables and obligations related to securities sold under repurchase agreements before the offsetting impact of $13,805 million as at October 31, 2024 ($6,994 million as at October 31, 2023). Liabilities related to securities loaned are not included, as the Bank can lend its own financial assets and those of third parties. The carrying value and fair value of liabilities related to securities loaned stood at $14,124 million before the offsetting impact of $4,188 million as at October 31, 2024 ($10,171 million before the offsetting impact of $2,090 million as at October 31, 2023).

 

The following table specifies the nature of the transactions related to financial assets transferred but not derecognized.

 

As at October 31			2024		2023
Carrying value of financial assets transferred but not derecognized
	Securities backed by insured residential mortgages and other securities sold to CHT		25,557		24,313
	Securities sold under repurchase agreements		46,716		40,357
	Securities loaned		62,356		49,654
			134,629		114,324

 

Note 10 - Investments in Associates and Joint Ventures

 

As at October 31		2024		2023
		Carrying value		Carrying value
Unlisted associates		40		49

 

As at October 31, 2024 and 2023, there were no significant restrictions limiting the ability of associates to transfer funds to the Bank in the form of dividends or to repay any loans or advances, if need be. Furthermore, the Bank has not made any specific commitment or contracted any contingent liability with respect to associates.

 

 

The table below provides summarized financial information related to the Bank's proportionate share in all unlisted associates that are not individually significant.

 

Year ended October 31(1)		2024		2023
Net income		8		6
Other comprehensive income		−		−
Comprehensive income		8		6

 

(1)       The amounts are based on the cumulative balances for the 12-month periods ended September 30, 2024 and 2023.

 

 

Note 11 - Premises and Equipment

 

		Owned assets held												Right-of-use  assets		Total
		Land	Head office building under construction	Buildings		Computer equipment		Equipment and furniture		Leasehold improvements		Total		Real estate
Cost
As at October 31, 2022		74	431	56		276		117		377		1,331		805		2,136
	Additions and modifications	−	222	3		70		8		53		356		59		415
	Disposals	−	−	(7)		−		(13)		(27)		(47)				(47)
	Transfers(1)	−	(397)	386		4		7		−		−		−		−
	Fully depreciated assets			(2)		(35)		(3)		(8)		(48)		(4)		(52)
	Impact of foreign currency translation	−	−	−		2		−		1		3		3		6
As at October 31, 2023		74	256	436		317		116		396		1,595		863		2,458
	Additions and modifications(2)	16	119	141		104		12		51		443		66		509
	Disposals	−	−	(2)		(3)		(1)		(4)		(10)				(10)
	Transfers(1)	−	(375)	321		24		30		−		−		−		−
	Fully depreciated assets			(1)		(60)		(2)		(15)		(78)		(54)		(132)
	Impact of foreign currency translation	−	−	−		2		−		−		2		1		3
As at October 31,2024(3)		90	−	895		384		155		428		1,952		876		2,828
Accumulated depreciation
As at October 31, 2022				38		162		61		179		440		299		739
	Depreciation for the year			4		55		10		36		105		106		211
	Disposals			(5)		−		(13)		(27)		(45)				(45)
	Impairment losses(4)			−		−		−		−		−		11		11
	Fully depreciated assets			(2)		(35)		(3)		(8)		(48)		(4)		(52)
	Impact of foreign currency translation			−		1		−		−		1		1		2
As at October 31, 2023				35		183		55		180		453		413		866
	Depreciation for the year			30		58		15		35		138		95		233
	Disposals			(2)		(3)		(1)		(4)		(10)				(10)
	Impairment losses(4)			−		−		−		−		−		2		2
	Fully depreciated assets			(1)		(60)		(2)		(15)		(78)		(54)		(132)
	Impact of foreign currency translation			−		−		−		−		−		1		1
As at October 31, 2024				62		178		67		196		503		457		960
Carrying value as at October 31, 2023		74	256	401		134		61		216		1,142		450		1,592
Carrying value as at October 31, 2024		90	−	833		206		88		232		1,449		419		1,868

 

(1)       During the year ended October 31, 2023, the Bank had started occupying certain floors of the new head office building under construction. As a result, amounts related to significant components being utilized were transferred to their corresponding asset categories.

(2)       During the year ended October 31, 2024, the Bank acquired office and commercial space in the building at 700 Saint-Jacques Street in Montreal.

(3)       As at October 31, 2024, contractual commitments related to the head office building stood at $5 million, covering a period up to 2025.

(4)       During the year ended October 31, 2024, the Bank recorded impairment losses of $2 million related to right-of-use assets ($11 million during the year ended October 31, 2023). These impairment losses were recognized in Non-interest expenses - Occupancy in the Consolidated Statement of Income and reported under the Other heading in segment disclosures.

 

Assets Leased Under Operating Leases

 

The Bank is a lessor under operating lease agreements for certain buildings. These leases have terms varying from one year to five years and do not contain any bargain purchase options or contingent rent.

 

The future minimum payments receivable under these operating leases total $5 million and include sublease revenues of $4 million related to real estate right-of-use assets.

 

Note 11 - Premises and Equipment (cont.)

 

Leases Recognized in the Consolidated Statement of Income

 

Year ended October 31		2024		2023
Interest expense		17		17
Expense for leases of low-value assets(1)		11		10
Expense relating to variable lease payments		80		100
Income from leasing and subleasing(2)		4		4

 

(1)    The expense relates to lease payments for low-value assets that are part of the exemptions permitted by the practical expedients of IFRS 16.

(2)    These amounts for the years ended October 31, 2024 and 2023 include variable lease payments of $2 million.

 

For the year ended October 31, 2024, the cash outflows for leases amounted to $218 million (2023: $229 million).

 

Note 12 - Goodwill and Intangible Assets

 

 

Goodwill

 

The following table presents changes in the carrying amounts of goodwill by cash-generating unit (CGU) and by business segment for the years ended October 31, 2024 and 2023.

 

			Personal and Commercial(1)		Wealth Management						Financial Markets(1)		USSF&I						Other		Total
					Third-Party Solutions(1)	Securities Brokerage(1)	Managed Solutions(1)		Total				Credigy Ltd.(1)		Advanced Bank of Asia Limited(1)		Total		Flinks Technology Inc.(1)
Balance as at October 31, 2022			54		256	434	269		959		235		34		136		170		101		1,519
	Impact of foreign currency   translation		−		−	−	−		−		−		−		2		2		−		2
Balance as at October 31, 2023			54		256	434	269		959		235		34		138		172		101		1,521
	Impact of foreign currency   translation		−		−	−	−		−		−		−		1		1		−		1
Balance as at October 31, 2024			54		256	434	269		959		235		34		139		173		101		1,522

 

(1)       Constitutes a CGU.

 

Goodwill Impairment Testing and Significant Assumptions

For impairment testing purposes, goodwill resulting from a business combination must be allocated, as of the acquisition date, to a CGU or group of CGUs expected to benefit from the synergies of the business combination. Goodwill is tested for impairment annually or more frequently if events or circumstances indicate that the recoverable value of the CGU or group of CGUs may have fallen below its carrying amount.

 

Goodwill was tested for impairment during the years ended October 31, 2024 and 2023, and no impairment loss was recognized.

 

The recoverable value of a CGU or group of CGUs is based on the value in use that is calculated based on discounted after-tax cash flows. Future after-tax cash flows are estimated based on a five-year period, which is the reference period used for the most recent financial forecasts approved by management. Cash flows beyond that period are extrapolated using a long-term growth rate.

 

The discount rate used for each CGU or group of CGUs is calculated using the cost of debt financing and the cost related to the Bank's equity. This rate corresponds to the Bank's weighted average cost of capital and reflects the risk specific to the CGU. The long-term growth rate used in calculating discounted cash flow estimates is based on the forecasted growth rate plus a risk premium. The rate is constant over the entire five-year period for which the cash flows were determined. Growth rates are determined, among other factors, based on past growth rates, economic trends, inflation, competition, and the impact of the Bank's strategic initiatives. As at October 31, 2024, for each CGU or CGU group, the discount rate (after tax) used was 9.72% (9.78% as at October 31, 2023), and the long-term growth rate varied between 2% and 5%, depending on the CGU, as at October 31, 2024 and 2023.

 

Estimating a CGU's value in use requires significant judgment regarding the inputs used in applying the discounted cash flow method. The Bank conducts sensitivity analyses by varying the after-tax discount rate upward by 1% and the terminal growth rates downward by 1%. Such sensitivity analyses demonstrate that a reasonable change in assumptions would not result in a CGU's carrying value exceeding its value in use.

 

Intangible Assets

 

		Indefinite useful life							Finite useful life						Total
		Management contracts(1)	Trademark		Total		Internally- generated software(2)		Other software		Other intangible assets		Total
Cost
As at October 31, 2022		159	8		167		2,109		128		60		2,297		2,464
	Acquisitions	−	−		−		282		17		−		299		299
	Disposals	−	−		−		(19)		−		−		(19)		(19)
	Impairment losses(3)	(1)	(1)		(2)		(315)		−		−		(315)		(317)
	Fully amortized intangible assets						(168)		(18)		−		(186)		(186)
As at October 31, 2023		158	7		165		1,889		127		60		2,076		2,241
	Acquisitions	−	−		−		241		19		−		260		260
	Impairment losses(3)	(2)	−		(2)		−		−		−		−		(2)
	Fully amortized intangible assets						(182)		(23)		(58)		(263)		(263)
As at October 31, 2024		156	7		163		1,948		123		2		2,073		2,236
Accumulated amortization
As at October 31, 2022							974		76		54		1,104		1,104
	Amortization for the year						287		20		6		313		313
	Disposals						(6)		−		−		(6)		(6)
	Impairment losses(3)						(240)		−		−		(240)		(240)
	Fully amortized intangible assets						(168)		(18)		−		(186)		(186)
As at October 31, 2023							847		78		60		985		985
	Amortization for the year						263		18		−		281		281
	Impairment losses(3)						−		−		−		−		−
	Fully amortized intangible assets						(182)		(23)		(58)		(263)		(263)
As at October 31, 2024							928		73		2		1,003		1,003
Carrying value as at October 31, 2023		158	7		165		1,042		49		−		1,091		1,256
Carrying value as at October 31, 2024		156	7		163		1,020		50		−		1,070		1,233

 

(1)       For annual impairment testing purposes, management contracts are allocated to the Managed Solutions CGU.

(2)       The remaining amortization period for significant internally-generated software is three years.

(3)       During the year ended October 31, 2024, the Bank recorded impairment losses of $2 million resulting from the impairment test carried out on indefinite-life intangible assets ($2 million during the year ended October 31, 2023) as well as a negligible amount related to internally-generated software for which the Bank has decided to cease its use or development ($75 million during the year ended October 31, 2023). In 2023, these impairment losses related to internally-generated software had been recognized in Non‑interest expenses - Technology in the Consolidated Statement of Income and reported under the Personal and Commercial ($59 million), Wealth Management ($8 million), Financial Markets ($7 million) segments and under the Other heading ($1 million) in segment disclosures.

 

 

 

Note 13 - Other Assets 

 

As at October 31		2024		2023(1)
Receivables, prepaid expenses and other items		3,579		3,118
Interest and dividends receivable		1,742		1,605
Due from clients, dealers and brokers		1,302		538
Defined benefit asset (Note 25)		487		356
Deferred tax assets (Note 26)		828		666
Current tax assets		669		925
Reinsurance contract assets		22		16
Insurance contract assets		41		20
Commodities(2)		573		544
		9,243		7,788

  

(1)       Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these Consolidated Financial Statements.

(2)       Commodities are recorded at fair value based on quoted prices in active markets and are classified in Level 1 of the fair value measurement hierarchy. 

 

 

Note 14 - Deposits

 

As at October 31						2024				2023
		On demand(1)		After notice(2)		Fixed term(3)		Total		Total
Personal		5,058		39,418		50,705		95,181		87,883
Business and government(4)		65,627		27,885		139,218		232,730		197,328
Deposit-taking institutions		2,643		95		2,896		5,634		2,962
		73,328		67,398		192,819		333,545		288,173

 

(1)       Demand deposits are deposits for which the Bank does not have the right to require notice of withdrawal and consist essentially of deposits in chequing accounts.

(2)       Notice deposits are deposits for which the Bank may legally require a notice of withdrawal and consist mainly of deposits in savings accounts.

(3)       Fixed-term deposits are deposits that can be withdrawn by the holder on a specified date and include term deposits, guaranteed investment certificates, savings accounts and plans, covered bonds, and other similar instruments.

(4)       As at October 31, 2024, business and government deposits included subscription receipts of $1.0 billion issued as part of the agreement to acquire Canadian Western Bank (CWB). For additional information, see Note 16.

 

 

Deposits - Business and government  includes, among other items, covered bonds, as described below, and deposits of $23.5 billion as at October 31, 2024 ($17.7 billion as at October 31, 2023) that are subject to the bank bail-in conversion regulations issued by the Government of Canada. These regulations provide certain powers to the Canada Deposit Insurance Corporation (CDIC), notably the power to convert certain eligible Bank shares and liabilities into common shares should the Bank become non-viable.

 

Covered Bonds

NBC Covered Bond Guarantor (Legislative) Limited Partnership

In December 2013, the Bank established the covered bond legislative program under which covered bonds are issued. It therefore created NBC Covered Bond Guarantor (Legislative) Limited Partnership (the Guarantor) to guarantee payment of the principal and interest owed to the bondholders. The Bank sold uninsured residential mortgages to the Guarantor and granted it loans to facilitate the acquisition of these assets. During the year ended October 31, 2024, the Bank issued 750 million euros in covered bonds, and covered bonds of 750 million euros matured (covered bonds of 280 million Swiss francs and 1.0 billion euros were issued, and covered bonds of 1.5 billion euros matured during the year ended October 31, 2023). Covered bonds totalled $11.4 billion as at October 31, 2024 ($10.9 billion as at October 31, 2023). For additional information, see Note 29 to these Consolidated Financial Statements.

 

The Bank has limited access to the assets owned by this structured entity according to the terms of the agreements that apply to this transaction. The assets owned by this entity totalled $22.3 billion as at October 31, 2024 ($20.9 billion as at October 31, 2023), of which $21.9 billion ($20.6 billion as at October 31, 2023) is presented in Residential mortgage loans in the Bank's Consolidated Balance Sheet.

 

 

 

Note 15 - Other Liabilities

 

As at October 31		2024		2023(1)
Accounts payable and accrued expenses		3,433		2,458
Subsidiaries' debts to third parties		236		224
Interest and dividends payable		2,290		2,022
Lease liabilities		472		517
Due to clients, dealers and brokers		853		669
Defined benefit liability (Note 25)		103		94
Allowances for credit losses - Off-balance-sheet commitments (Note 8)		214		176
Deferred tax liabilities (Note 26)		69		28
Current tax liabilities		123		204
Insurance contract liabilities		28		8
Other items(2)(3)(4)		865		1,016
		8,686		7,416

  

(1)       Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these Consolidated Financial Statements.

(2)       As at October 31, 2024, Other items included provisions for litigation of $10 million ($42 million as at October 31, 2023).

(3)       As at October 31, 2024, Other items included provisions for onerous contracts of $18 million ($31 million as at October 31, 2023).

(4)       As at October 31, 2024, Other items included the financial liability resulting from put options written to non-controlling interests of Flinks for an amount of $5 million ($23 million as at October 31, 2023).

 

 

 

Note 16 - Subscription Receipts

 

 

In connection with the CWB transaction, the Bank offered an aggregate of 9,262,500 subscription receipts at a price of $112.30 per subscription receipt pursuant to a public offering (the Public Offering) and concurrent private placement (the Concurrent Private Placement) for a total amount of $1.0 billion.

 

Pursuant to the Public Offering, on June 14, 2024, the Bank issued and sold 4,453,000 subscription receipts at a price of $112.30 for total gross proceeds of approximately $500 million. The Public Offering was underwritten on a bought-deal basis by a syndicate of underwriters (the Underwriters). On July 17, 2024, the Bank issued and sold 178,250 additional subscription receipts pursuant to the partial exercise of the Underwriters' over-allotment option. Pursuant to the Concurrent Private Placement, on June 14, 2024, the Bank issued and sold 4,453,000 subscription receipts at a price of $112.30 to an affiliate of Caisse de dépôt et placement du Québec (CDPQ) for total gross proceeds of approximately $500 million. On July 17, 2024, the Bank issued and sold 178,250 additional subscription receipts to an affiliate of CDPQ pursuant to CDPQ's option to purchase additional subscription receipts to maintain its pro-rata ownership.

 

Each subscription receipt entitles the holder thereof to receive automatically upon closing of the CWB transaction, without any action on the part of the holder and without payment of additional consideration, (i) one common share of National Bank, and (ii) a cash payment equal to the amount per common share of any cash dividends declared by the Bank and for which the record date falls within the period from June 17, 2024 up to (but excluding) the last day the subscription receipts are outstanding (less applicable withholding taxes, if any). In the event that the transaction fails, the subscription receipt holders have the right to the reimbursement of the full amount, including interest earned. As at October 31, 2024, the total amount related to the subscription receipts, including accrued interest, was $1.0 billion, net of transaction costs. This amount has been included in Deposits - Business and government. For additional information, see Note 14.

 

 

 

Note 17 - Subordinated Debt

 

 

The subordinated debt represents direct unsecured obligations, in the form of notes and debentures, to the Bank's debt holders. The rights of the Bank's note and debenture holders are subordinate to the claims of depositors and certain other creditors. Approval from OSFI is required before the Bank can redeem its subordinated notes and debentures in whole or in part.

 

On February 5, 2024, the Bank issued medium-term notes for a total amount of $500 million bearing interest at 5.279% and maturing on February 15, 2034. The interest on these notes will be payable semi-annually at a rate of 5.279% per annum until February 15, 2029 and, thereafter, will be payable quarterly at a floating rate equal to Daily Compounded CORRA (Canadian Overnight Repo Rate Average) plus 1.80%. With the prior approval of OSFI, the Bank may, at its option, redeem these notes as of February 15, 2029, in whole or in part, at their nominal value plus accrued and unpaid interest. Given that the medium-term notes satisfy the non-viability contingent capital requirements, they qualify for the purposes of calculating regulatory capital under Basel III.

 

 

As at October 31						2024		2023
Maturity date		Interest rate			Redemption date
August 2032(1)		5.426%	(2)		August 16, 2027(3)	750		750
February 2034 (1)		5.279%	(4)		February 15, 2029(3)	500		−
						1,250		750
Fair value hedge adjustment(5)						12		−
Unamortized issuance costs(6)						(4)		(2)
Total						1,258		748

 

(1)       These notes contain non-viability contingent capital (NVCC) provisions and qualify for the purposes of calculating regulatory capital under Basel III. In the case of a trigger event as defined by OSFI, each note will be automatically and immediately converted, on a full and permanent basis, without the consent of the holder, into a specified number of common shares of the Bank as determined using an automatic conversion formula with a multiplier of 1.5 and a conversion price based on the greater of: (i) a floor price of $5.00; (ii) the current market price of common shares, which represents the volume weighted average price of common shares for the ten trading days ending on the trading day preceding the date of the trigger event. If the common shares are not listed on an exchange when this price is being established, the price will be the fair value reasonably determined by the Bank's Board. The number of shares issued is determined by dividing the par value of the note (plus accrued and unpaid interest on such note) by the conversion price and then applying the multiplier.

(2)       Bearing interest at a rate of 5.426%, payable semi-annually until August 16, 2027, and thereafter bearing interest at a floating rate equal to Daily Compounded CORRA plus 2.32%, payable quarterly.

(3)       With the prior approval of OSFI, the Bank may, at its option, redeem these notes in whole or in part, at their nominal value plus accrued and unpaid interest.

(4)       Bearing interest at a rate of 5.279%, payable semi-annually until February 15, 2029, and thereafter bearing interest at a floating rate equal to Daily Compounded CORRA plus 1.80%, payable quarterly.

(5)       The fair value hedge adjustment represents the impact of the hedging transactions applied to hedge changes in the fair value of subordinated debt caused by interest rate fluctuations.

(6)       The unamortized costs related to the issuance of the subordinated debt represent the initial cost, net of accumulated amortization, calculated using the effective interest rate method.

 

 

 

Note 18 - Derivative Financial Instruments

 

 

 

Derivative financial instruments are financial contracts whose value is derived from an underlying interest rate, exchange rate, equity price, commodity price, credit spread, or index.

 

The main types of derivative financial instruments used are presented below.

 

Forwards and Futures

Forwards and futures are contractual obligations to buy or sell a specified amount of currency, interest rate, commodity, or financial instrument on a specified future date at a specified price. Forwards are tailor-made agreements transacted in the over-the-counter market. Futures are traded on organized exchanges and are subject to cash margining calculated daily by clearing houses.

 

Swaps

Swaps are over-the-counter contracts in which two parties agree to exchange cash flows with specific characteristics. The Bank uses the following types of swap contracts:

 

·     Cross-currency swaps are transactions in which counterparties exchange fixed-rate interest payments and principal payments in different currencies.

·     Interest rate swaps are transactions in which counterparties exchange fixed- and floating-rate interest payments based on the notional principal value in the same currency.

·     Commodity swaps are transactions in which counterparties exchange fixed- and floating-rate payments based on the notional principal value of a commodity.

·     Equity swaps are transactions in which counterparties agree to exchange the return on one equity or group of equities for a payment based on an interest rate benchmark.

·     Credit default swaps are transactions in which one of the parties agrees to pay returns to the other party so that the latter can make a payment if a credit event occurs.

 

Options

Options are agreements between two parties in which the writer of the option grants the buyer the right, but not the obligation, to buy or sell, either at a specified date or dates or at any time prior to a predetermined expiry date, a specific amount of currency, commodity, or financial instrument at an agreed-upon price upon the sale of the option. The writer receives a premium for the sale of this instrument.

 

Notional Amounts⁽¹⁾

 

As at October 31		2024														2023
		Term to maturity										Contracts held for trading purposes		Contracts designated as hedges
		3 months or less		Over 3 months to  12 months		Over 1 year to 5 years		Over 5 years		Total contracts						Total contracts
Interest rate contracts
OTC contracts
Forward rate agreements
	Not settled by central counterparties	17,311		757		−		−		18,068		18,068		−		9,112
	Settled by central counterparties	−		570		−		−		570		570		−		−
Swaps
	Not settled by central counterparties	4,945		12,176		88,329		62,495		167,945		165,450		2,495		140,437
	Settled by central counterparties	277,339		206,969		536,680		209,241		1,230,229		1,129,201		101,028		947,848
Options purchased		37		2,013		3,147		1,795		6,992		6,828		164		7,387
Options written		887		2,810		3,774		2,527		9,998		9,493		505		8,619
		300,519		225,295		631,930		276,058		1,433,802		1,329,610		104,192		1,113,403
Exchange-traded contracts
Futures
	Long positions	2,263		6,830		8,211		−		17,304		17,304		−		44,468
	Short positions	26,235		28,985		9,069		−		64,289		64,289		−		63,418
Options purchased		8,633		−		−		−		8,633		8,633		−		14
Options written		278		−		−		−		278		278		−		14
		37,409		35,815		17,280		−		90,504		90,504		−		107,914
Foreign exchange contracts
OTC contracts
Forwards		31,968		14,502		10,107		953		57,530		57,525		5		54,634
Swaps		313,548		76,960		108,747		44,522		543,777		518,470		25,307		500,841
Options purchased		15,306		25,163		5,347		−		45,816		45,816		−		36,038
Options written		15,590		31,062		7,034		−		53,686		53,686		−		41,161
		376,412		147,687		131,235		45,475		700,809		675,497		25,312		632,674
Exchange-traded contracts
Futures
	Long positions	51		−		−		−		51		51		−		69
	Short positions	28		−		−		−		28		28		−		28
		79		−		−		−		79		79		−		97
Equity, commodity and
	credit derivative contracts(2)
OTC contracts
Forwards		6		5		21		−		32		32		−		3,579
Swaps
	Not settled by central counterparties	36,295		33,482		21,696		1,287		92,760		92,580		180		81,033
	Settled by central counterparties	169		189		7,372		767		8,497		8,497		−		7,400
Options purchased		8,186		142		1,334		3,615		13,277		13,277		−		6,219
Options written		7,970		229		3,490		323		12,012		12,012		−		3,329
		52,626		34,047		33,913		5,992		126,578		126,398		180		101,560
Exchange-traded contracts
Futures
	Long positions	4,358		556		2,698		55		7,667		7,667		−		3,030
	Short positions	36,165		4,805		9,173		3		50,146		50,146		−		22,445
Options purchased		42,527		3,089		2,985		−		48,601		48,601		−		14,620
Options written		2,038		2,272		1,390		57		5,757		5,757		−		16,325
		85,088		10,722		16,246		115		112,171		112,171		−		56,420
		852,133		453,566		830,604		327,640		2,463,943		2,334,259		129,684		2,012,068

 

(1)       Notional amounts are not recognized in assets or liabilities in the Consolidated Balance Sheet. They represent the reference amount of the contract to which a rate or price is applied to determine the amount of cash flows to be exchanged.

(2)       Includes precious metal contracts.

 

Note 18 - Derivative Financial Instruments (cont.)

 

Credit Risk 

Credit risk on derivative financial instruments is the risk of financial loss that the Bank will have to assume if a counterparty fails to honour its contractual obligations. Credit risk related to derivative financial instruments is subject to the same credit approval, credit limit, and credit monitoring standards as those applied to the Bank's other credit transactions. Consequently, the Bank evaluates the creditworthiness of counterparties and manages the size of the portfolios as well as the diversification and maturity profiles of these financial instruments.

 

The Bank limits the credit risk of over-the-counter contracts by dealing with creditworthy counterparties and entering into contracts that provide for the exchange of collateral between parties where the fair value of the outstanding transactions exceeds an agreed threshold. The Bank also negotiates master netting agreements that provide for the simultaneous close-out and settling of all transactions with a given counterparty on a net basis in the event of default, insolvency, or bankruptcy. However, overall exposure to credit risk, reduced through master netting agreements, may change substantially after the balance sheet date because it is affected by all transactions subject to a contract as well as by changes in the market rates of the underlying instruments.

 

The Bank also uses financial intermediaries to have access to established clearing houses in order to minimize the settlement risk arising from financial derivative transactions. In some cases, the Bank has direct access to clearing houses for settling derivative financial instruments. In addition, certain derivative financial instruments traded over the counter are settled directly or indirectly by central counterparties.

 

In the case of exchange-traded contracts, exposure to credit risk is limited because these transactions are standardized contracts executed on established exchanges, each of which is associated with a well-capitalized clearing house that assumes the obligations of both counterparties and guarantees their performance obligations. All exchange-traded contracts are subject to initial margins and daily settlement.

 

Terms Used

Replacement Cost

Replacement cost is the Bank's maximum credit risk associated with derivative financial instruments as at the Consolidated Balance Sheet date. This amount is the positive fair value of all derivative financial instruments, before all master netting agreements and collateral held.

 

Credit Risk Equivalent

The credit risk equivalent amount is the total replacement cost plus an amount representing the potential future credit risk exposure, as outlined in OSFI's Capital Adequacy Requirements Guideline.

 

Risk-Weighted Amount

The risk-weighted amount is determined by applying the OSFI guidance to the credit risk equivalent.

 

Credit Risk Exposure of the Derivative Financial Instrument Portfolio

 

As at October 31			2024						2023
			Replacement cost		Credit risk equivalent(1)		Risk- weighted amount(1)		Replacement cost		Credit risk equivalent(1)		Risk- weighted amount(1)
Interest rate contracts			2,397		3,358		584		6,708		3,024		457
Foreign exchange contracts			6,430		6,791		1,496		7,233		5,607		1,582
Equity, commodity and credit derivative contracts			3,482		10,234		1,464		3,575		8,544		1,428
			12,309		20,383		3,544		17,516		17,175		3,467
Impact of master netting agreements			(6,410)						(8,032)
			5,899		20,383		3,544		9,484		17,175		3,467

 

(1)       The amounts are presented net of the Impact of master netting agreements.

 

 

Credit Risk Exposure of the Derivative Financial Instrument Portfolio by Counterparty

 

As at October 31			2024				2023
			Replacement cost		Credit risk equivalent		Replacement cost		Credit risk equivalent
OECD member-country governments			372		2,497		928		3,052
Banks of OECD member countries			835		4,922		606		3,236
Other			4,692		12,964		7,950		10,887
			5,899		20,383		9,484		17,175

  

 

Fair Value of Derivative Financial Instruments ⁽¹⁾

 

As at October 31			2024						2023
			Positive		Negative		Net		Positive		Negative		Net
Contracts held for trading purposes
Interest rate contracts
	Forwards		69		63		6		147		54		93
	Swaps		2,213		3,248		(1,035)		4,753		4,700		53
	Options		97		87		10		179		208		(29)
			2,379		3,398		(1,019)		5,079		4,962		117
Foreign exchange contracts
	Forwards		617		380		237		878		368		510
	Swaps		5,072		5,024		48		5,550		6,004		(454)
	Options		487		466		21		588		544		44
			6,176		5,870		306		7,016		6,916		100
Equity, commodity and credit derivative contracts
	Forwards		9		3		6		40		244		(204)
	Swaps		2,076		2,908		(832)		2,573		3,741		(1,168)
	Options		1,377		3,129		(1,752)		962		2,424		(1,462)
			3,462		6,040		(2,578)		3,575		6,409		(2,834)
Total - Contracts held for trading purposes			12,017		15,308		(3,291)		15,670		18,287		(2,617)
Contracts designated as hedges
Interest rate contracts
	Swaps		18		258		(240)		1,629		1,384		245
	Options		−		17		(17)		−		11		(11)
			18		275		(257)		1,629		1,395		234
Foreign exchange contracts
	Swaps		254		177		77		217		181		36
			254		177		77		217		181		36
Equity, commodity and credit derivative contracts
	Swaps		20		−		20		−		25		(25)
			20		−		20		−		25		(25)
Total - Contracts designated as hedges			292		452		(160)		1,846		1,601		245
	Designated as fair value hedges		54		302		(248)		928		902		26
	Designated as cash flow hedges		238		150		88		918		699		219
Total fair value			12,309		15,760		(3,451)		17,516		19,888		(2,372)
Impact of master netting agreements			(6,410)		(6,410)		−		(8,032)		(8,032)		−
			5,899		9,350		(3,451)		9,484		11,856		(2,372)

 

(1)       The fair value includes the impact of treating variation margins as settlement of the related derivative financial instrument exposure by certain central counterparties.

 

 

  

Note 19 - Hedging Activities

 

 

The Bank's market risk exposure, risk management objectives, policies and procedures, and risk measurement methods are presented in the Risk Management section of the MD&A for the year ended October 31, 2024.

 

The Bank has elected, as permitted under IFRS 9, to continue applying the hedge accounting requirements of IAS 39. Some of the tables present information on currencies, specifically, the U.S. dollar (USD), the Australian dollar (AUD), the Canadian dollar (CAD), the Hong Kong dollar (HKD), the euro (EUR), the pound sterling (GBP), the Swiss franc (CHF), the Yuan (CNH) and the Mexican peso (MXV).

Note 19 - Hedging Activities (cont.)

 

The following table shows the notional amounts and the weighted average rates by term to maturity of the designated derivative instruments and their fair value by type of hedging relationship. The fair value includes the impact of treating variation margins as settlement of the related derivative exposure by certain central counterparties.

 

As at October 31																		2024																	2023
						Term to maturity																Total			Fair value					Total			Fair value
						1 year or less				Over 1 year to 2 years				Over 2 years to 5 years				Over 5 years							Assets		Liabilities						Assets		Liabilities
Fair value hedges
Interest rate risk
	Interest rate swaps																								18		258						928		858
		Notional amount - CDOR reform(1)				−				−				−				−				−								7,609
		Notional amount - Other				22,012				7,058				18,194				13,751				61,015								28,868
		Average fixed interest rate - Pay fixed				2.6	%			3.7	%			3.5	%			3.5	%			3.5	%							2.1	%
		Average fixed interest rate - Receive fixed				4.8	%			4.2	%			3.2	%			3.4	%			4.1	%							4.1	%
	Cross-currency swaps																								36		27						−		33
		Notional amount				−				978				77				171				1,226								112
		Average USD-AUD exchange rate				−				−				−			$	0.6936			$	0.6936							$	0.6943
		Average USD-EUR exchange rate				−				−				−			$	1.0513			$	1.0513							$	1.0513
		Average USD-MXV exchange rate				−				−				−			$	0.4573			$	0.4573
		Average USD-CNH exchange rate				−			$	0.1373			$	0.1369				−			$	0.1373
	Options																								−		17						−		11
		Notional amount				−				56				136				477				669								653
		Average fixed interest rate - Purchased				−				(0.8)	%			(1.2)	%			−				(1.2)	%							(1.3)	%
		Average fixed interest rate - Written				−				5.2	%			−				2.2	%			2.4	%							2.4	%
						22,012				8,092				18,407				14,399				62,910			54		302			37,242			928		902
Cash flow hedges
Interest rate risk
	Interest rate swaps																								−		−						701		526
		Notional amount - CDOR reform(1)				−				−				−				−				−								7,219
		Notional amount - Other				5,081				8,942				23,096				5,389				42,508								29,963
		Average fixed interest rate - Pay fixed				3.5	%			3.5	%			3.3	%			2.7	%			3.4	%							3.3	%
		Average fixed interest rate - Receive fixed				2.0	%			1.2	%			2.7	%			3.1	%			2.6	%							2.6	%
	Cross-currency swaps																								218		150						217		148
		Notional amount - CDOR reform(1)				−				−				−				−				−								3,913
		Notional amount - Other				5,655				7,853				10,567				−				24,075								16,789
		Average CAD-USD exchange rate			$	1.3093			$	1.3193			$	1.3447				−			$	1.3280							$	1.3133
		Average USD-EUR exchange rate			$	1.1487			$	1.1210			$	1.1043				−			$	1.1206							$	1.1402
		Average USD-GBP exchange rate				−			$	1.1945				−				−			$	1.1945							$	1.2207
		Average CHF-USD exchange rate				−				−			$	1.0064				−			$	1.0064							$	1.0064
Equity price risk
	Equity swaps
		Notional amount - CDOR reform(1)				−				−				−				−				−								144			−		25
		Notional amount - Other				180				−				−				−				180			20		−
		Average price			$	113.97				−				−				−			$	113.97							$	101.63
						10,916				16,795				33,663				5,389				66,763			238		150			58,028			918		699
Hedges of net investments
	in foreign operations(2)
Foreign exchange risk
	Cross-currency swaps
		Notional amount				11				−				−				−				11			−		−			10			−		−
		Average CAD-USD exchange rate			$	1.3561				−				−				−			$	1.3561							$	1.3209
		Average USD-HKD exchange rate			$	0.1287				−				−				−			$	0.1287							$	0.1280
						11				−				−				−				11			−		−			10			−		−
						32,939				24,887				52,070				19,788				129,684			292		452			95,280			1,846		1,601

 

(1)       Includes only contracts that referenced the CDOR rate and that matured after June 28, 2024.

(2)       As at October 31, 2024, the Bank also designated foreign currency deposits denominated in U.S. dollars of $3,989 million as net investment hedging instruments ($1,892 million as at October 31, 2023).

 

 

Fair Value Hedges

 

Fair value hedge transactions consist of using derivative financial instruments (interest rate swaps and options) to hedge changes in the fair value of a financial asset or financial liability caused by interest rate fluctuations. Changes in the fair values of derivative financial instruments used as hedging instruments offset changes in the fair value of the hedged items. The Bank applies this strategy mainly to portfolios of securities measured at fair value through other comprehensive income, fixed-rate mortgage loans, fixed-rate deposits, liabilities related to transferred receivables, and subordinated debt.

 

In addition, when a fixed-rate asset or liability is denominated in a foreign currency, the Bank sometimes uses cross-currency swaps to hedge the associated foreign exchange risk. The Bank may designate a cross-currency swap to exchange the fixed-rate foreign currency for the functional currency at a floating rate in a single hedging relationship addressing both interest rate risk and foreign exchange risk. In certain cases, given that interest rate risk and foreign exchange risk are hedged in a single hedging relationship, the information below does not distinguish between interest rate risk and the combination of interest rate risk and foreign exchange risk as two separate risk categories. The Bank applies this strategy mainly to foreign currency fixed-rate deposits.

 

Regression analysis is used to assess hedge effectiveness and determine the hedge ratio. For fair value hedges, the main source of potential hedge ineffectiveness is a circumstance where the critical terms of the hedging instrument and the hedged item are not closely aligned.

 

The following tables show amounts related to hedged items as well as the results of the fair value hedges.

 

							As at October 31, 2024				Year ended October 31, 2024
					Carrying value of hedged items		Cumulative hedge adjustments from active hedges		Cumulative adjustments from discontinued hedges		Gains (losses) on the hedged items for ineffectiveness measurement(1)		Gains (losses) on the hedging instruments for ineffectiveness measurement(1)		Hedge ineffectiveness(1)
Securities at fair value through other comprehensive income					12,316		167		(117)		433		(427)		6
Mortgages					5,224		21		(127)		164		(168)		(4)
Deposits					32,554		(170)		(69)		(466)		465		(1)
Liabilities related to transferred receivables					5,014		210		(8)		(383)		385		2
Subordinated debt					510		12		−		(12)		12		−
											(264)		267		3

 

							As at October 31, 2023				Year ended October 31, 2023
					Carrying value of hedged items		Cumulative hedge adjustments from active hedges		Cumulative adjustments from discontinued hedges		Gains (losses) on the hedged items for ineffectiveness measurement(1)		Gains (losses) on the hedging instruments for ineffectiveness measurement(1)		Hedge ineffectiveness(1)
Securities at fair value through other comprehensive income					6,068		(332)		(211)		(191)		189		(2)
Mortgages					2,882		(213)		(224)		(12)		28		16
Deposits					17,728		(606)		(168)		214		(219)		(5)
Liabilities related to transferred receivables					4,155		(186)		13		202		(202)		−
											213		(204)		9

 

(1)       Amounts are presented on a pre-tax basis.

 

 

Note 19 - Hedging Activities (cont.)

 

Cash Flow Hedges

 

Cash flow hedge transactions consist of using interest rate swaps to hedge the risk of changes in future cash flows caused by floating-rate assets or liabilities. In addition, the Bank sometimes uses cross-currency swaps to hedge the foreign exchange risk caused by assets or liabilities denominated in foreign currencies. In certain cases, given that interest rate risk and foreign exchange risk are hedged in a single hedging relationship, the information below does not distinguish between interest rate risk and the combination of interest rate risk and foreign exchange risk as two separate risk categories. The Bank applies this strategy mainly to its loan, personal credit line, acceptance, and deposit portfolios as well as liabilities related to transferred receivables.

 

The Bank also uses total return swaps to hedge the risk of changes in future cash flows related to the Restricted Stock Unit (RSU) Plan. Some of these swaps are designated as part of a cash flow hedge against a portion of the unrecognized obligation of the RSU Plan. In cash flow hedges, the derivative financial instruments used as hedging instruments reduce the variability of the future cash flows related to the hedged items.

 

Regression analysis is used to assess hedge effectiveness and to determine the hedge ratio. For cash flow hedges, the main source of potential hedge ineffectiveness is a circumstance where the critical terms of the hedging instrument and the hedged item are not closely aligned.

 

The following tables show the amounts related to hedged items as well as the results of the cash flow hedges.

 

				As at October 31, 2024								Year ended October 31, 2024
				Accumulated other comprehensive income from active hedges		Accumulated other comprehensive income from discontinued hedges		Gains (losses) on hedged items for ineffectiveness measurement(1)		Gains (losses) on hedging instruments for ineffectiveness measurement(1)		Hedge ineffectiveness(1)		Unrealized gains (losses) included in Other comprehensive income as the effective portion of the hedging instrument(1)		Losses (gains) reclassified to Net interest income(1)
Interest rate risk
	Loans			105		(186)		(292)		288		4		284		48
	Deposits			(246)		5		46		(55)		(4)		(458)		(31)
	Acceptances			−		156		22		(22)		−		(22)		(148)
	Liabilities related to transferred
		receivables		(18)		21		19		(20)		(1)		(19)		(39)
				(159)		(4)		(205)		191		(1)		(215)		(170)
Equity price risk
	Other liabilities			60		−		(76)		76		−		76		−
				(99)		(4)		(281)		267		(1)		(139)		(170)

 

				As at October 31, 2023								Year ended October 31, 2023
				Accumulated other comprehensive income from active hedges		Accumulated other comprehensive income from discontinued hedges		Gains (losses) on hedged items for ineffectiveness measurement(1)		Gains (losses) on hedging instruments for ineffectiveness measurement(1)		Hedge ineffectiveness(1)		Unrealized gains (losses) included in Other comprehensive income as the effective portion of the hedging instrument(1)		Losses (gains) reclassified to Net interest income(1)
Interest rate risk
	Loans			(170)		(240)		127		(131)		(3)		(127)		128
	Deposits			127		117		(666)		667		8		223		(17)
	Acceptances			59		266		(54)		52		−		52		(52)
	Liabilities related to transferred
		receivables		11		49		6		(6)		−		(6)		(25)
				27		192		(587)		582		5		142		34
Equity price risk
	Other liabilities			(16)		−		17		(17)		−		(17)		−
				11		192		(570)		565		5		125		34

 

(1)       Amounts are presented on a pre-tax basis.

 

 

Hedges of Net Investments in Foreign Operations

 

The Bank's structural foreign exchange risk arises from investments in foreign operations denominated in currencies other than the Canadian dollar. The Bank measures this risk by assessing the impact of foreign currency fluctuations and hedges it using derivative and non-derivative financial instruments (cross-currency swaps and deposits). In a hedge of a net investment in a foreign operation (net investment hedge), the financial instruments used offset the foreign exchange gains and losses on the investments. When non-derivative financial instruments are designated as foreign exchange risk hedges, only the changes in fair value that are attributable to foreign exchange risk are taken into account when assessing and calculating the effectiveness of the hedge.

 

Assessing the effectiveness of net investment hedges consists of comparing changes in the carrying value of the deposits or the fair value of the derivative attributable to exchange rate fluctuations with changes in the net investment in a foreign operation attributable to exchange rate fluctuations. Inasmuch as the notional amount of the hedging instruments and the hedged net investments are aligned, no ineffectiveness is expected.

 

The following tables present the amounts related to hedged items as well as the results of the net investment hedges.

 

As at October 31, 2024

Year ended October 31, 2024

Accumulated other comprehensive income from active hedges

Accumulated other comprehensive income from discontinued hedges

Gains (losses) on hedged items for ineffectiveness measurement(1)

Gains (losses) on hedging instruments for ineffectiveness measurement(1)

Hedge ineffectiveness(1)

Unrealized gains (losses) included in Other comprehensive income as the effective portion of the hedging instrument(1)

Losses (gains) reclassified to the Non-interest income(1)

Net investments in foreign

operations denominated in:

USD

(160)

(246)

90

(90)

−

(90)

−

 

As at October 31, 2023

Year ended October 31, 2023

Accumulated other comprehensive income from active hedges

Accumulated other comprehensive income from discontinued hedges

Gains (losses) on hedged items for ineffectiveness measurement(1)

Gains (losses) on hedging instruments for ineffectiveness measurement(1)

Hedge ineffectiveness(1)

Unrealized gains (losses) included in Other comprehensive income as the effective portion of the hedging instrument(1)

Losses (gains) reclassified to the Non-interest income(1)

Net investments in foreign

operations denominated in:

USD

38

(353)

66

(66)

−

(66)

−

 

(1)       Amounts are presented on a pre-tax basis.

 

Note 19 - Hedging Activities (cont.)

 

Reconciliation of Equity Components

 

The following table presents a reconciliation by risk category of Accumulated other comprehensive income attributable to hedge accounting.

 

As at October 31				2024				2023
				Net gains (losses) on cash flow hedges		Net foreign currency translation adjustments		Net gains (losses) on cash flow hedges		Net foreign currency translation adjustments
Balance at beginning				146		307		31		204
Hedges of net investments in foreign operations(1)
	Gains (losses) included as the effective portion					(90)				(66)
	Net foreign currency translation gains (losses) on investments    in foreign operations					80				152
Cash flow hedges(1)
	Gains (losses) included as the effective portion
		Interest rate risk		(215)				142
		Equity price risk		76				(17)
	Losses (gains) reclassified to Net interest income
		Interest rate risk		(170)				34
Income taxes				86		23		(44)		17
Balance at end				(77)		320		146		307

 

(1)       Amounts are presented on a pre-tax basis.

 

 

Note 20 - Share Capital and Other Equity Instruments

 

Authorized

Common Shares

An unlimited number of shares without par value.

 

First Preferred Shares

An unlimited number of shares, without par value, issuable for a maximum aggregate consideration of $7.5 billion.

 

First Preferred Shares and Other Equity Instruments

 

													As at October 31, 2024
				Redemption and conversion date(1)(2)			Redemption  price per share or LRCN ($)(1)			Convertible into preferred shares(2)			Dividend per share ($) or interest rate per LRCN(3)			Reset premium of the dividend rate or interest rate
First preferred shares
	issued and outstanding
		Series 30(4)		May 15, 2029	(5)(6)		25.00			Series 31			0.38694	(7)		2.40	%
		Series 32(4)		February 15, 2025	(5)(6)		25.00			Series 33			0.23994	(7)		2.25	%
		Series 38(4)		November 15, 2027	(5)(6)		25.00			Series 39			0.43919	(7)		3.43	%
		Series 40(4)		May 15, 2028	(5)(6)		25.00			Series 41			0.36363	(7)		2.58	%
		Series 42(4)		November 15, 2028	(5)(6)		25.00			Series 43			0.44100	(7)		2.77	%
Other equity instruments
	issued and outstanding
		Limited Recourse Capital Notes (LRCN)
		Series 1 (LRCN - Series 1)(8)(9)		October 15, 2025	(5)		1,000.00			Series 44	(8)		4.30	%(10)		3.943	%
		Series 2 (LRCN - Series 2)(8)(9)		July 15, 2026	(5)		1,000.00			Series 45	(8)		4.05	%(10)		3.045	%
		Series 3 (LRCN - Series 3)(8)(9)		October 16, 2027	(5)		1,000.00			Series 46	(8)		7.50	%(10)		4.281	%
First preferred shares
	authorized but not issued
		Series 31(4)		May 15, 2029	(5)		25.00	(11)		n.a.			Floating rate	(12)		2.40	%
		Series 33(4)		February 15, 2025	(5)		25.00	(11)		n.a.			Floating rate	(12)		2.25	%
		Series 39(4)		November 15, 2027	(5)		25.00	(11)		n.a.			Floating rate	(12)		3.43	%
		Series 41(4)		May 15, 2028	(5)		25.00	(11)		n.a.			Floating rate	(12)		2.58	%
		Series 43(4)		November 15, 2028	(5)		25.00	(11)		n.a.			Floating rate	(12)		2.77	%

 

n.a.        Not applicable

(1)         Redeemable in cash at the Bank's option, in whole or in part, subject to the provisions of the Bank Act (Canada) and to OSFI approval. For the preferred shares, the redemption prices are increased by all the declared and unpaid dividends on the preferred shares to the date fixed for redemption. In the case of LRCN, the redemption prices are increased by interest accrued and unpaid up to the redemption date.

(2)         Convertible at the option of the holders of first preferred shares issued and outstanding, subject to certain conditions.

(3)         The dividends are non-cumulative and payable quarterly, whereas interest on the LRCN is payable semi-annually.

(4)         Upon the occurrence of a trigger event, as defined by OSFI, each outstanding preferred share will be automatically and immediately converted, on a full and permanent basis, without the consent of the holder, into a number of Bank common shares determined pursuant to an automatic conversion formula. This conversion will be calculated by dividing the value of the preferred shares, i.e., $25.00 per share, plus all declared and unpaid dividends as at the date of the trigger event, by the value of the common shares. The value of the common shares will be the greater of a $5.00 floor price or the current market price of the common shares. Current market price means the volume weighted average trading price of common shares for the ten consecutive trading days ending on the trading day preceding the date of the trigger event. If the common shares are not listed on an exchange when this price is being established, the price will be the fair value reasonably determined by the Bank's Board.

(5)         For the preferred shares, redeemable at the date fixed for redemption and on the same date every five years thereafter. In the case of LRCN, the redemption occurs automatically upon the redemption of the preferred shares issued by the Bank in conjunction with the LRCN and held in a limited recourse trust. The preferred shares issued and held in a limited recourse trust are redeemable for a period of one month from the date fixed for redemption and on the same dates every five years thereafter.   

(6)         Convertible on the date fixed for conversion and on the same date every five years thereafter, subject to certain conditions.

(7)         The dividend amount is set for the five-year period commencing on May 16, 2024 for Series 30, on February 16, 2020 for Series 32, on November 16, 2022 for Series 38, on May 16, 2023 for Series 40 and on November 16, 2023 for Series 42 and ending on the redemption date. Thereafter, these shares carry a non-cumulative quarterly fixed dividend in an amount per share determined by multiplying the rate of interest equal to the sum of the five-year Government of Canada bond yield on the applicable fixed-rate calculation date by $25.00, plus the reset premium.

(8)         The LRCN - Series 1, LRCN - Series 2 and LRCN - Series 3 are notes for which recourse is limited to the assets held by an independent trustee in a consolidated limited recourse trust. The trust assets consist of Series 44, Series 45 and Series 46 preferred shares issued by the Bank in conjunction with the LRCN - Series 1, LRCN - Series 2 and LRCN - Series 3. In the event of (i) non-payment of interest on any of the interest payment dates, (ii) non-payment of the redemption amount upon redemption of the LRCN, (iii) non-payment of the principal amount upon maturity of the LRCN, or (iv) an event of default in respect of the LRCN, the noteholders will have recourse only to the assets of the trust, and each noteholder will be entitled to its pro rata share of the assets of the trust. In such circumstances, delivery of the assets of the trust will eliminate all of the Bank's obligations with respect to the LRCN. The LRCN - Series 1, LRCN - Series 2 and LRCN - Series 3 are redeemable at maturity or earlier to the extent that the Bank redeems the Series 44, Series 45 and Series 46 preferred shares from the date fixed for redemption, and subject to OSFI's consent and approval.

 

Note 20 - Share Capital and Other Equity Instruments (cont.)

 

(9)         The Series 44, Series 45 and Series 46 preferred shares issued by the Bank in conjunction with the LRCN - Series 1, LRCN - Series 2 and LRCN - Series 3 are held by a consolidated limited recourse trust on the Bank's balance sheet and are therefore eliminated for financial reporting purposes. Upon the occurrence of a trigger event, as defined by OSFI; (i) each LRCN will be automatically redeemed and the redemption price will be covered by delivery of the trust's assets that consist of Series 44, Series 45 and Series 46 preferred shares; (ii) each outstanding preferred share will be automatically and immediately converted on a full and permanent basis, without the consent of the holder, into a number of Bank common shares determined pursuant to an automatic conversion formula. This conversion will be calculated by dividing the value of the preferred shares, i.e., $1,000 per share, plus all accrued and unpaid interest as at the date of the trigger event, by the value of the common shares. The value of the common shares will be the greater of a $5.00 floor price or the current market price of the common shares. Current market price means the volume weighted average trading price of common shares for the ten consecutive trading days ending on the trading day preceding the date of the trigger event. If the common shares are not listed on an exchange when this price is being established, the price will be the fair value reasonably determined by the Bank's Board.

(10)      The interest rate is set for the initial period ending on the date fixed for redemption. Every five years thereafter until November 15, 2075 for the LRCN - Series 1, until August 15, 2076 for the LRCN - Series 2 and until November 16, 2077 for the LRCN - Series 3, the interest rate on the notes will be adjusted and will be an annual interest rate equal to the five-year Government of Canada bond yield on the applicable interest rate calculation date, plus the interest rate reset premium.

(11)      As of the date fixed for redemption, and every five years thereafter, the redemption price will be $25.00 per share.

(12)      The dividend period begins as of the date fixed for redemption. The amount of the floating quarterly non-cumulative dividend is determined by multiplying by $25.00 the rate of interest equal to the sum of the 90-day Government of Canada treasury bill yield on the floating rate calculation date, plus the reset premium.

 

Second Preferred Shares

15 million shares without par value, issuable for a maximum aggregate consideration of $300 million. As at October 31, 2024, no shares had been issued or traded.

 

Shares and Other Equity Instruments Outstanding

 

As at October 31				2024				2023
				Number of shares or LRCN		Shares or LRCN $		Number of shares or LRCN		Shares or LRCN $
First Preferred Shares
		Series 30		14,000,000		350		14,000,000		350
		Series 32		12,000,000		300		12,000,000		300
		Series 38		16,000,000		400		16,000,000		400
		Series 40		12,000,000		300		12,000,000		300
		Series 42		12,000,000		300		12,000,000		300
				66,000,000		1,650		66,000,000		1,650
Other equity instruments
		LRCN - Series 1		500,000		500		500,000		500
		LRCN - Series 2		500,000		500		500,000		500
		LRCN - Series 3		500,000		500		500,000		500
				1,500,000		1,500		1,500,000		1,500
Preferred shares and other equity instruments				67,500,000		3,150		67,500,000		3,150
Common shares at beginning of year				338,284,629		3,294		336,582,124		3,196
Issued pursuant to the Stock Option Plan				2,297,601		146		1,678,321		95
Impact of shares purchased or sold for trading(1)				161,646		23		31,975		3
Other				−		−		(7,791)		−
Common shares at end of year				340,743,876		3,463		338,284,629		3,294

 

(1)       As at October 31, 2024, a total of 188,371 shares were sold short for trading, representing an amount of $26 million (26,725 shares were sold short for trading, representing an amount of $3 million as at October 31, 2023).

 

 

 

Dividends Declared and Distributions on Other Equity Instruments

 

Year ended October 31				2024				2023
				Dividends or interest $		Dividends per share		Dividends or interest $		Dividends per share
First Preferred Shares
		Series 30		18		1.2770		14		1.0063
		Series 32		12		0.9598		12		0.9598
		Series 38		28		1.7568		28		1.7568
		Series 40		17		1.4545		16		1.3023
		Series 42		21		1.7640		14		1.2375
				96				84
Other equity instruments
		LRCN - Series 1(1)		21				21
		LRCN - Series 2(2)		20				20
		LRCN - Series 3(3)		38				38
				79				79
Preferred shares and other equity instruments				175				163
Common shares				1,468		4.3200		1,344		3.9800
				1,643				1,507

 

(1)    The LRCN - Series 1 bear interest at a fixed rate of 4.30% per annum.

(2)    The LRCN - Series 2 bear interest at a fixed rate of 4.05% per annum.

(3)    The LRCN - Series 3 bear interest at a fixed rate of 7.50% per annum.

 

Repurchases of Common Shares

On December 12, 2023, the Bank began a normal course issuer bid to repurchase for cancellation up to 7,000,000 common shares (representing approximately 2.1% of its then outstanding common shares) over the 12-month period ended on December 11, 2024. On December 12, 2022, the Bank had begun a normal course issuer bid to repurchase for cancellation up to 7,000,000 common shares (representing approximately 2.1% of its then outstanding common shares) over the 12-month period ended on December 11, 2023. Any repurchase through the Toronto Stock Exchange is done at market prices. The common shares may also be repurchased through other means authorized by the Toronto Stock Exchange and applicable regulations, including private agreements or share repurchase programs under issuer bid exemption orders issued by the securities regulators. A private purchase made under an exemption order issued by a securities regulator will be done at a discount to the prevailing market price. The amounts that are paid above the average book value of the common shares are charged to Retained earnings. During the years ended October 31, 2024 and 2023, the Bank did not repurchase any common shares.

 

 

Note 20 - Share Capital and Other Equity Instruments (cont.)

 

Reserved Common Shares

As at October 31, 2024 and 2023, there were 15,507,568 common shares reserved under the Dividend Reinvestment and Share Purchase Plan. As at October 31, 2024, there were 17,766,087 common shares reserved under the Stock Option Plan (20,063,688 as at October 31, 2023).

 

Restriction on the Payment of Dividends

The Bank is prohibited from declaring dividends on its common or preferred shares if there are reasonable grounds for believing that the Bank would, by so doing, be in contravention of the regulations of the Bank Act (Canada) or OSFI's capital adequacy and liquidity guidelines. In addition, the ability to pay common share dividends is restricted by the terms of the outstanding preferred shares pursuant to which the Bank may not pay dividends on its common shares without the approval of the holders of the outstanding preferred shares, unless all preferred share dividends have been declared and paid or set aside for payment.

 

Dividend Reinvestment and Share Purchase Plan

The Bank has a Dividend Reinvestment and Share Purchase Plan for holders of its common and preferred shares under which they can acquire common shares of the Bank without paying commissions or administration fees. Participants acquire common shares through the reinvestment of cash dividends paid on the shares they hold or through optional cash payments of at least $1 per payment, up to a maximum of $5,000 per quarter. Common shares subscribed by participants are purchased on their behalf in the secondary market through the Bank's transfer agent, Computershare Trust Company of Canada, at a price equal to the average purchase price of the common shares during the three business days immediately following the dividend payment date.

 

 

 

Note 21 - Non-Controlling Interests

 

As at October 31		2024		2023
Flinks Technology Inc.(1)		−		2

 

(1)       As at October 31, 2024, the non-controlling interest in Flinks stood at 3.0% (14.1% as at October 31, 2023)

 

 

Note 22 - Capital Disclosure

 

Capital Management Objectives, Policies and Procedures

Capital management has a dual role of ensuring a competitive return to the Bank's shareholders while maintaining a solid capital foundation that covers the risks inherent to the Bank's business, supports its business segments, and protects its clients.

 

The Bank's capital management policy defines the guiding principles as well as the roles and responsibilities regarding its internal capital adequacy assessment process. This process is a key tool in establishing the Bank's capital strategy and is subject to quarterly reviews and periodic amendments.

 

Capital Management

Capital ratios are obtained by dividing capital (as defined by the OSFI's Capital Adequacy Requirements Guideline) by risk-weighted assets (RWA) and are expressed as percentages. RWA are calculated in accordance with the rules established by OSFI for on- and off-balance-sheet risks. Credit, market, and operational risks are factored into the risk-weighted assets calculation for regulatory purposes. The definition adopted by the Basel Committee on Banking Supervision (BCBS) distinguishes between three types of capital. Common Equity Tier 1 (CET1) capital consists of common shareholders' equity less goodwill, intangible assets, and other CET1 capital deductions. Additional Tier 1 (AT1) capital consists of eligible non-cumulative preferred shares, limited recourse capital notes, and other AT1 capital adjustments. The sum of CET1 and AT1 capital forms what is known as Tier 1 capital. Tier 2 capital consists of the eligible portion of subordinated debt and certain allowances for credit losses. Total regulatory capital is the sum of Tier 1 and Tier 2 capital.

 

The Bank and all other major Canadian banks have to maintain the following minimum capital ratios established by OSFI: a CET1 capital ratio of at least 11.5%, a Tier 1 capital ratio of at least 13.0%, and a Total capital ratio of at least 15.0%. All of these ratios include a capital conservation buffer of 2.5% established by the BCBS and OSFI, a 1.0% surcharge applicable solely to Domestic Systemically Important Banks (D-SIBs), and a 3.5% domestic stability buffer (DSB) established by OSFI. The DSB, which can vary from 0% to 4.0% of RWA, consists exclusively of CET1 capital. A D‑SIB that fails to meet this buffer requirement will not be subject to automatic constraints to reduce capital distributions but must provide a remediation plan to OSFI. The Bank also has to meet the requirements of the capital output floor, under which its total RWA must not be lower than 72.5% of the total RWA as calculated under the Basel III Standardized Approaches. Initially, OSFI proposed a phase-in of the floor factor over three years, starting at 65.0% in the second quarter of 2023 and rising 2.5% per year to reach 72.5% in fiscal 2026. On July 5, 2024, OSFI announced a one-year delay to the increase in the capital output floor. Therefore, the revised floor factor will reach 72.5% in fiscal 2027. For fiscal 2024, the floor factor is set at 67.5%; it will remain at this level until the end of fiscal 2025 and then increase until 2027. If the capital requirement is less than the capital output floor requirement after applying the floor factor, the difference is added to the total RWA. Lastly, OSFI requires D-SIBs to maintain a Basel III leverage ratio of at least 3.5%, which includes a Tier 1 capital buffer of 0.5% applicable only to D-SIBs.

 

OSFI also requires D-SIBs to maintain a risk-based total loss-absorbing capacity (TLAC) ratio of at least 25.0% (including the DSB) of RWA and a TLAC leverage ratio of at least 7.25%. The purpose of TLAC is to ensure that a D-SIB has sufficient loss-absorbing capacity to support its internal recapitalization in the unlikely event it becomes non-viable.

 

In addition, OSFI requires that regulatory capital instruments other than common shares contain Non-Viability Contingent Capital (NVCC) provisions to ensure that investors bear losses before taxpayers where the government determines that it is in the public interest to contribute to the survival of a non-viable financial institution. All the Bank's regulatory capital instruments other than common shares contain NVCC provisions.

 

In the first quarter of 2024, the Bank implemented OSFI's finalized guidance of the revised market risk capital rules, consistent with the BCBS's Fundamental Review of the Trading Book (FRTB) as well as the revised credit valuation adjustment (CVA) framework.

 

During the years ended October 31, 2024 and 2023, the Bank was in compliance with all of OSFI's regulatory capital, leverage, and TLAC requirements.

 

Note 22 - Capital Disclosure (cont.)

 

Regulatory Capital⁽¹⁾, Leverage Ratio⁽¹⁾ and TLAC⁽²⁾

 

As at October 31			2024			2023
Capital
	CET1		19,321			16,920
	Tier 1		22,470			20,068
	Total		24,001			21,056
Risk-weighted assets			140,975			125,592
Total exposure			511,160			456,478
Capital ratios
	CET1		13.7	%		13.5	%
	Tier 1		15.9	%		16.0	%
	Total		17.0	%		16.8	%
Leverage ratio			4.4	%		4.4	%
Available TLAC			44,040			36,732
TLAC ratio			31.2	%		29.2	%
TLAC leverage ratio			8.6	%		8.0	%

 

(1)       Capital, risk-weighted assets, total exposure, the capital ratios, and the leverage ratio are calculated in accordance with the Basel III rules, as set out in OSFI's Capital Adequacy Requirements Guideline and Leverage Requirements Guideline.

(2)       Available TLAC, the TLAC ratio, and the TLAC leverage ratio are calculated in accordance with OSFI's Total Loss Absorbing Capacity Guideline.

 

 

Note 23 - Trading Activity Revenues

 

Trading activity revenues consist of the net interest income and the non-interest income related to trading activities.

 

Net interest income comprises dividends related to financial assets and liabilities associated with trading activities and certain interest income related to the financing of these financial assets and liabilities, net of interest expenses.

 

Non-interest income consists of realized and unrealized gains and losses as well as interest income on securities measured at fair value through profit or loss, income from held-for-trading derivative financial instruments, changes in the fair value of loans at fair value through profit or loss, changes in the fair value of financial instruments designated at fair value through profit or loss, realized and unrealized gains and losses as well as interest expenses on obligations related to securities sold short, certain commission income as well as other income related to trading activities, and any applicable transaction costs.

 

Year ended October 31		2024		2023
Net interest income (loss) related to trading activity		(3,076)		(1,816)
Non-interest income related to trading activity
Trading revenues (losses)		4,299		2,677
Other revenues		28		19
		4,327		2,696
Trading activity revenues		1,251		880

 

Note 24 - Share-Based Payments

 

 

The compensation expense information provided below excludes the impact of hedging.

 

Stock Option Plan

The Bank's Stock Option Plan is for officers and other designated persons of the Bank and its subsidiaries. Under this plan, options are awarded annually and provide participants with the right to purchase common shares at an exercise price equal to the closing price of the Bank's common share on the Toronto Stock Exchange on the day preceding the award. The options vest evenly over a four-year period and expire ten years from the award date or, in certain circumstances set out in the plan, within specified time limits. The Stock Option Plan contains provisions for retiring employees that allow the participant's rights to continue vesting in accordance with the stated terms of the award agreement. The maximum number of common shares that may be issued under the Stock Option Plan was 17,766,087 as at October 31, 2024 (20,063,688 as at October 31, 2023). The number of common shares reserved for a participant may not exceed 5% of the total number of Bank shares issued and outstanding.

 

As at October 31		2024						2023
		Number of options		Weighted average exercise price				Number of options		Weighted average exercise price
Stock Option Plan
Outstanding at beginning		11,546,688		$	70.37			11,861,749		$	64.80
Awarded		1,222,652		$	94.08			1,416,060		$	94.05
Exercised		(2,297,601)		$	56.85			(1,678,321)		$	50.43
Cancelled(1)		(28,680)		$	86.83			(52,800)		$	87.49
Outstanding at end		10,443,059		$	76.08			11,546,688		$	70.37
Exercisable at end		6,835,406		$	67.88			7,471,041		$	61.18

 

(1)       No expired options during the year ended October 31, 2024 (8,096 expired options during the year ended October 31, 2023).

 

 

Exercise price		Options outstanding		Options exercisable				Expiry date
$47.93		145,509		145,509				December 2024
$42.17		585,849		585,849				December 2025
$54.69		626,164		626,164				December 2026
$64.14		947,908		947,908				December 2027
$58.79		1,100,602		1,100,602				December 2028
$71.86		1,181,621		1,181,621				December 2029
$71.55		1,617,940		1,136,765				December 2030
$96.35		1,648,186		788,354				December 2031
$94.05		1,366,628		322,634				December 2032
$94.08		1,222,652		−				December 2033
		10,443,059		6,835,406

 

During the year ended October 31, 2024, the Bank awarded 1,222,652 stock options (1,416,060 stock options during the year ended October 31, 2023) with an average fair value of $13.74 per option ($14.76 for the year ended October 31, 2023).

 

The average fair value of options awarded was estimated on the award date using the Black-Scholes model as well as the following assumptions.

 

Year ended October 31		2024		2023
Risk-free interest rate		3.61%		3.25%
Expected life of options		7 years		7 years
Expected volatility		22.29%		23.13%
Expected dividend yield		4.62%		4.23%

Note 24 - Share-Based Payments (cont.)

 

The expected life of the options is based on historical data and is not necessarily representative of how the options will be exercised in the future. Expected volatility is extrapolated from the implied volatility of the Bank's share price and observable market inputs, which are not necessarily representative of actual results. The expected dividend yield represents the annualized dividend divided by the Bank's share price at the award date. The risk-free interest rate is based on the Canadian dollar swap curve at the award date. The exercise price is equal to the Bank's share price at the award date. No other market parameter has been included in the fair value measurement of the options.

 

For the year ended October 31, 2024, a $17 million compensation expense related to this plan was recognized in the Consolidated Statement of Income ($18 million for the year ended October 31, 2023).

 

Stock Appreciation Rights (SAR) Plan

The SAR Plan is for officers and other designated persons of the Bank and its subsidiaries. Under this plan, participants receive, upon exercising the right, a cash amount equal to the difference between the closing price of the Bank's common share on the Toronto Stock Exchange on the day preceding the exercise date and the closing price on the day preceding the award date. SARs vest evenly over a four-year period and expire ten years after the award date or, in certain circumstances set out in the plan, within specified time limits. The SAR Plan contains provisions for retiring employees that allow the participant's rights to continue vesting in accordance with the stated terms of the award agreement. For the year ended October 31, 2024, a $6 million compensation expense related to this plan was recognized in the Consolidated Statement of Income (negligible amount for the year ended October 31, 2023).

 

As at October 31		2024						2023
		Number of SARs			Weighted average exercise price			Number of SARs			Weighted average exercise price
SAR Plan(1)
Outstanding at beginning		185,672			$	65.29		207,841			$	60.73
Awarded		16,772			$	94.08		19,072			$	94.05
Exercised		(73,686)			$	58.50		(41,241)			$	55.64
Outstanding at end		128,758			$	72.92		185,672			$	65.29
Exercisable at end		79,324			$	61.60		124,531			$	55.53

 

(1)       No SARs cancelled or expired during the years ended October 31, 2024 and 2023.

 

 

Exercise price		SARs outstanding				SARs exercisable		Expiry date
$47.93		−				−		December 2024
$42.17		10,000				10,000		December 2025
$54.69		16,320				16,320		December 2026
$64.14		16,236				16,236		December 2027
$58.79		16,604				16,604		December 2028
$71.86		15,396				15,396		December 2029
$71.55		7,626				−		December 2030
$96.35		10,732				−		December 2031
$94.05		19,072				4,768		December 2032
$94.08		16,772				−		December 2033
		128,758				79,324

 

Deferred Stock Unit (DSU) Plans

The DSU Plans are for officers and other designated persons of the Bank and its subsidiaries as well as for directors. These plans allow the Bank to tie a portion of the value of the compensation of participants to the future value of the Bank's common shares. A DSU is a right that has a value equal to the closing price of a common share of the Bank on the Toronto Stock Exchange on the day preceding the award. DSUs generally vest evenly over four years. Additional DSUs are credited to the accounts of participants in an amount equal to the dividends declared on Bank common shares and vest evenly over the same period as the reference DSUs. DSUs may be cashed only when participants retire or leave the Bank or, for directors, when their term ends. The DSU Plans contain provisions for retiring employees whereby participants may continue vesting all units in accordance with the stated terms of the award agreement.

 

During the year ended October 31, 2024, the Bank awarded 35,412 DSUs at a weighted average price of $101.48 (37,477 DSUs at a weighted average price of $97.45 for the year ended October 31, 2023). A total of 460,259 DSUs were outstanding as at October 31, 2024 (483,735 DSUs as at October 31, 2023). For the year ended October 31, 2024, a $26 million compensation expense related to these plans was recognized in the Consolidated Statement of Income ($3 million for the year ended October 31, 2023).

 

 

Restricted Stock Unit (RSU) Plan

The RSU Plan is for certain officers and other designated persons of the Bank and its subsidiaries. The objective of this plan is to ensure that the compensation of certain officers and other designated persons is competitive and to foster retention. An RSU represents a right that has a value equal to the average closing price of the Bank's common share, as published by the Toronto Stock Exchange, over the ten trading days preceding the sixth business day in December. RSUs generally vest evenly over three years, although some RSUs vest on the sixth business day of December of the third year following the award date, i.e., the date on which all RSUs expire. Additional RSUs are credited to the accounts of participants in an amount equal to the dividends declared on the Bank's common shares and vest over the same period as the reference RSUs. The RSU Plan contains provisions for retiring employees whereby participants may continue vesting units in accordance with the stated terms of the award agreement.

 

During the year ended October 31, 2024, the Bank awarded 2,133,400 RSUs at a weighted average price of $91.78 (2,058,936 RSUs at a weighted average price of $96.42 for the year ended October 31, 2023). As at October 31, 2024, a total of 4,645,753 RSUs were outstanding (4,382,431 RSUs as at October 31, 2023). For the year ended October 31, 2024, a $347 million compensation expense related to this plan was recognized in the Consolidated Statement of Income ($173 million for the year ended October 31, 2023).

 

Performance Stock Unit (PSU) Plan

The PSU Plan is for officers and other designated persons of the Bank. The objective of this plan is to tie a portion of the value of the compensation of these officers and other designated persons to the future value of the Bank's common shares. A PSU represents a right that has a value equal to the average closing price of the Bank's common share, as published by the Toronto Stock Exchange, over the ten trading days preceding the sixth business day in December, adjusted upward or downward according to performance criteria, which is based on the Bank's total shareholder return (TSR) growth index over three years compared to the average TSR growth index of the comparator group composed of Canadian banks over three years. PSUs vest on the sixth business day of December of the third year following the award date, i.e., the date on which all PSUs expire. Additional PSUs are credited to the accounts of participants in an amount equal to the dividends declared on the Bank's common shares and vest over the same period as the reference PSUs. The PSU Plan contains provisions for retiring employees whereby participants may continue vesting units in accordance with the stated terms of the award agreement.

 

During the year ended October 31, 2024, the Bank awarded 232,296 PSUs at a weighted average price of $91.78 (234,706 PSUs at a weighted average price of $96.42 for the year ended October 31, 2023). As at October 31, 2024, a total of 749,971 PSUs were outstanding (745,764 PSUs as at October 31, 2023). For the year ended October 31, 2024, a $50 million compensation expense related to this plan was recognized in the Consolidated Statement of Income ($27 million for the year ended October 31, 2023).

 

Deferred Compensation Plan

This plan is exclusively for key employees of the Wealth Management segment. The purpose of this plan is to foster the retention of key employees and promote revenue growth and continuous profitability improvement within the Wealth Management segment. Under this plan, participants can defer a portion of their annual compensation, and the Bank may pay a contribution to key employees when certain financial objectives are met. Amounts awarded by the Bank and the compensation deferred by participants are invested in, among other items, Bank common share units. These share units represent a right that has a value equal to the closing price of the Bank's common share on the Toronto Stock Exchange on the award date. Additional units are credited to the accounts of participants in an amount equal to the dividends declared on the Bank's common shares. Share units representing the amounts awarded by the Bank vest evenly over four years. When a participant retires, or in certain cases when the participant's employment ceases, the participant receives a cash amount representing the value of the vested share units.

 

During the year ended October 31, 2024, the Bank awarded 143,871 share units at a weighted average price of $105.53 (161,713 share units at a weighted average price of $94.90 for the year ended October 31, 2023). As at October 31, 2024, a total of 2,419,041 share units were outstanding (2,229,248 share units as at October 31, 2023). For the year ended October 31, 2024, a $123 million compensation expense related to this plan was recognized in the Consolidated Statement of Income ($3 million for the year ended October 31, 2023).

 

Employee Share Ownership Plan

Under the Bank's Employee Share Ownership Plan, employees who meet the eligibility criteria can contribute up to 8% of their annual gross salary by way of payroll deductions. The Bank matches 25% of the employee contribution up to a maximum of $1,500 per annum. Bank contributions vest to the employee after one year of uninterrupted participation in the plan. Subsequent contributions vest immediately. The Bank's contributions, amounting to $17 million for the year ended October 31, 2024 ($16 million for the year ended October 31, 2023), were recognized when paid in Compensation and employee benefits in the Consolidated Statement of Income. As at October 31, 2024, a total of 6,155,909 common shares were held for this plan (6,392,648 common shares as at October 31, 2023).

 

Plan shares are purchased on the open market and are considered to be outstanding for earnings per share calculations. Dividends paid on the Bank's common shares held for the Employee Share Ownership Plan are used to purchase other common shares on the open market.

 

Plan Liabilities and Intrinsic Value

Total liabilities arising from the Bank's share-based compensation plans amounted to $1,123 million as at October 31, 2024 ($686 million as at October 31, 2023). The intrinsic value of these liabilities that had vested as at October 31, 2024 was $571 million ($345 million as at October 31, 2023).

 

 

Note 25 - Employee Benefits - Pension Plans and Other Post-Employment Benefit Plans

 

 

The Bank offers pension plans that have a defined benefit component and a defined contribution component. The Bank also offers other post-employment benefit plans to eligible retirees. The defined benefit component of the pension plans provides benefits based on years of plan participation and average earnings at retirement. The other post-employment benefits include post-employment medical, dental, and life insurance coverage. Since September 19, 2022, the Bank has been offering a new defined contribution component that is available to all new employees upon hiring as well as to current participants of the defined benefit component. Therefore, as of that date, the defined benefit component is no longer offered to new employees. For the defined contribution component, the Bank's base contribution equals a percentage of annual salary and the Bank's additional contribution varies according to the employee's contributions, and the sum of the employee's age and years of continuous service. The defined benefit component of the pension plans is funded, whereas the defined contribution component and the other post-employment benefit plans are not funded. The fair value of the defined benefit component and the present value of the defined benefit obligations were measured as at October 31.

 

The Bank's most significant pension plan is the Employee Pension Plan of the National Bank of Canada; it is registered with OSFI and the Canada Revenue Agency and subject to the Pension Benefits Standards Act, 1985 and the Income Tax Act.

 

The defined benefit component of the pension plans and the other post-employment benefit plans exposes the Bank to specific risks such as investment performance, changes to the discount rate used to calculate the obligation, the longevity of plan participants, and future inflation. While management believes that the assumptions used in the actuarial valuation process are reasonable, there remains a degree of risk and uncertainty that may cause future results to differ significantly from these assumptions, which could give rise to gains or losses.

 

According to the Bank's governance rules, the policies and risk management related to the defined benefit component of the pension plans are overseen at different levels by the pension committees, the Bank's management, and the Board's Human Resources Committee. The defined benefit component of the pension plans are examined on an ongoing basis in order to monitor the funding and investment policies, the financial status of the plans, and the Bank's funding requirements.

 

The Bank's funding policy for the defined benefit component of the pension plans is to make at least the minimum annual contributions required by pension regulators.

 

For funded plans, the Bank determines whether an economic benefit exists in the form of potential reductions in future contributions and in the form of refunds from the plan surplus, where permitted by applicable regulations and plan provisions.

 

Defined Benefit Obligation, Assets of the Plans, and Funded Status

 

As at October 31
				Pension plans - Defined benefit component				Other post-employment benefit plans
				2024		2023		2024		2023
Defined benefit obligation
Balance at beginning				4,020		3,971		94		111
	Current service cost			96		92		−		−
	Interest cost			231		218		5		6
	Remeasurements
		Actuarial (gains) losses arising from changes in demographic assumptions		−		(40)		−		1
		Actuarial (gains) losses arising from changes in financial assumptions		541		(163)		8		(3)
		Actuarial (gains) losses arising from experience adjustments		43		71		4		(12)
	Employee contributions			73		72
	Benefits paid			(230)		(201)		(8)		(9)
Balance at end				4,774		4,020		103		94
Plan assets
Fair value at beginning				4,376		4,469
	Interest income			247		242
	Administration cost			(3)		(3)
	Remeasurements
		Return on plan assets (excluding interest income)		711		(329)
	Bank contributions(1)			87		126
	Employee contributions			73		72
	Benefits paid			(230)		(201)
Fair value at end				5,261		4,376
Defined benefit asset (liability) at end				487		356		(103)		(94)

 

(1)       For fiscal 2025, the Bank expects to pay an employer contribution of $98 million to the defined benefit component of the pension plans.

 

 

Defined Benefit Asset (Liability)

 

As at October 31
			Pension plans - Defined benefit component				Other post-employment benefit plans
			2024		2023		2024		2023
Defined benefit asset included in Other assets			487		356
Defined benefit liability included in Other liabilities			−		−		(103)		(94)
			487		356		(103)		(94)

 

Cost for Pension Plans and Other Post-Employment Benefit Plans

 

Year ended October 31
			Pension plans				Other post-employment benefit plans
			2024		2023		2024		2023
Current service cost			96		92		−		−
Interest expense (income), net			(16)		(24)		5		6
Administration costs			3		3
Expense of the defined benefit component			83		71		5		6
Expense of the defined contribution component			21		11
Expense recognized in Net income			104		82		5		6
Remeasurements(1)
	Actuarial (gains) losses on the defined benefit obligation		584		(132)		12		(14)
	Return on plan assets(2)		(711)		329
Remeasurements recognized in Other comprehensive income			(127)		197		12		(14)
			(23)		279		17		(8)

 

(1)       Changes related to the discount rate and to the return on plan assets are reviewed and updated on a quarterly basis. All other assumptions are updated annually.

(2)       Excludes interest income.

 

 

Allocation of the Fair Value of the Assets of the Defined Benefit Component of the Pensions Plans

 

As at October 31				2024						2023
				Quoted in an active market(1)		Not quoted in an active market		Total		Quoted in an active market(1)		Not quoted in an active market		Total
Asset classes
	Cash and cash equivalents			−		120		120		−		378		378
	Equity securities			432		1,450		1,882		841		1,300		2,141
	Debt securities
		Canadian government(2)		(537)		2		(535)		(237)		−		(237)
		Canadian provincial and municipal governments		−		3,333		3,333		−		2,128		2,128
		Other issuers		−		403		403		−		171		171
	Other			−		58		58		−		(205)		(205)
				(105)		5,366		5,261		604		3,772		4,376

 

(1)       Unadjusted quoted prices in active markets for identical assets that the Bank can access at the measurement date.

(2)       Includes obligations related to securities sold short.

 

The Bank's investment strategy for plan assets considers several factors, including the time horizon of pension plan obligations and investment risk. For each plan, an allocation range per asset class is defined using a mix of equity and debt securities to optimize the risk-return profile of plan assets and minimize asset/liability mismatching.

 

The assets of the pension plans may include investment securities issued by the Bank. As at October 31, 2024 and 2023, the assets of the pension plans do not include any securities issued by the Bank.

 

For fiscal 2024, the Bank and its related entities received $19 million ($20 million in fiscal 2023) in fees from the pension plans for related management, administration, and custodial services.

 

 

Note 25 - Employee Benefits - Pension Plans and Other Post-Employment Benefit Plans (cont.)

 

Allocation of the Defined Benefit Obligation by the Status of the Participants in the Defined Benefit Component of the Pension Plans

 

As at October 31
			Pension plans - Defined benefit component						Other post-employment benefit plans
			2024			2023			2024			2023
Active employees			43	%		41	%		1	%		3	%
Retirees			52	%		54	%		99	%		97	%
Participants with deferred vested benefits			5	%		5	%
			100	%		100	%		100	%		100	%
Weighted average duration of the
	defined benefit obligation (in years)		15			14			11			10

 

Significant Actuarial Assumptions (Weighted Average)

 

Discount Rate

The discount rate assumption is based on an interest rate curve that represents the yields on corporate AA bonds. Short-term maturities are obtained using a curve based on observed data from corporate AA bonds. Long-term maturities are obtained using a curve based on actual data and extrapolated data.

 

To measure the obligation related to the defined benefit component of the pension plans and related to the other post-employment benefit plans, the vested benefits that the Bank expects to pay in each future period are discounted to the measurement date using the spot rate associated with each of the respective periods based on the yield curve derived using the above methodology. The sum of discounted benefit amounts represents the defined benefit obligation. An average discount rate that replicates this obligation is then computed.

 

To better reflect current service cost, a separate discount rate was determined to account for the timing of future benefit payments associated with the additional year of service to be earned by the plan's active participants. Since these benefits are, on average, being paid at a later date than the benefits already earned by participants as a whole (i.e., longer duration), this method results in the use of a generally higher discount rate for calculating current service cost than that used to measure obligations where the yield curve is positively sloped. The methodology used to determine this discount rate is the same as the one used to establish the discount rate for measuring the obligation.

 

Other Assumptions

For measurement purposes, the estimated annual growth rate for health care costs was 4.97% as at October 31, 2024 (4.94% as at October 31, 2023). Based on the assumption retained, this rate is expected to decrease gradually to 3.57% in 2044 and remain steady thereafter.

 

Mortality assumptions are a determining factor when measuring the defined benefit obligation. Determining the expected benefit payout period is based on best estimate assumptions regarding mortality. Mortality tables are reviewed at least once a year, and the assumptions made are in accordance with accepted actuarial practice. New results regarding the plans are reviewed and used in calculating best estimates of future mortality.

 

As at October 31
					Pension plans - Defined benefit component						Other post-employment benefit plans
					2024			2023			2024			2023
Defined benefit obligation
	Discount rate				4.85	%		5.65	%		4.85	%		5.65	%
	Rate of compensation increase				4.00	%		4.00	%		2.00	%		2.00	%
	Health care cost trend rate										4.97	%		4.94	%
	Life expectancy (in years)  at 65 for a participant currently at
		Age 65
			Men		22.5			22.4			22.5			22.4
			Women		24.8			24.8			24.8			24.8
		Age 45
			Men		23.5			23.4			23.5			23.4
			Women		25.7			25.7			25.7			25.7
Year ended October 31
					Pension plans - Defined benefit component						Other post-employment benefit plans
					2024			2023			2024			2023
Pension plan expense
	Discount rate - Current service				5.60	%		5.45	%		5.60	%		5.45	%
	Discount rate - Interest expense (income), net				5.65	%		5.45	%		5.65	%		5.45	%
	Rate of compensation increase				4.00	%		4.00	%		2.00	%		2.00	%
	Health care cost trend rate										4.94	%		4.77	%
	Life expectancy (in years) at 65 for a participant currently at
		Age 65
			Men		22.4			22.4			22.4			22.4
			Women		24.8			24.7			24.8			24.7
		Age 45
			Men		23.4			23.4			23.4			23.4
			Women		25.7			25.6			25.7			25.6

 

Sensitivity of Significant Assumptions for 2024

 

The following table shows the potential impacts of changes to key assumptions on the defined benefit obligation of the pension plans and other post‑employment benefit plans as at October 31, 2024. These impacts are hypothetical and should be interpreted with caution, as changes in each significant assumption may not be linear.

 

As at October 31, 2024
		Pension plans - Defined  benefit component		Other post-employment benefit plans
		Change in the obligation		Change in the obligation
Impact of a 0.25% increase in the discount rate		(178)		(3)
Impact of a 0.25% decrease in the discount rate		188		3
Impact of a 0.25% increase in the rate of compensation increase		34
Impact of a 0.25% decrease in the rate of compensation increase		(34)
Impact of a 1.00% increase in the health care cost trend rate				3
Impact of a 1.00% decrease in the health care cost trend rate				(3)
Impact of an increase in the age of participants by one year		(107)		(1)
Impact of a decrease in the age of participants by one year		102		1

 

Projected Benefit Payments

 

Year ended October 31
		Pension plans - Defined benefit component		Other post-employment benefit plans
2025		224		8
2026		233		8
2027		240		7
2028		247		7
2029		254		7
2030 to 2034		1,390		32

 

Note 26 - Income Taxes  

 

 

The Bank's income tax expense reported in the Consolidated Financial Statements is as follows.

 

Year ended October 31			2024		2023(1)
Consolidated Statement of Income
Current taxes
	Current year		1,124		772
	Canada Recovery Dividend(2)		−		32
	Change in income tax rate(2)		−		10
	Prior period adjustments		(25)		48
			1,099		862
Deferred taxes
	Origination and reversal of temporary differences		(133)		(162)
	Change in income tax rate(2)		−		(18)
	Prior period adjustments		(5)		(63)
			(138)		(243)
			961		619
Consolidated Statement of Changes in Equity
	Share issuance expenses, other equity instruments and other		(40)		(23)
	Impact of IFRS 17 adoption on November 1, 2022(3)		−		(18)
			(40)		(41)
Consolidated Statement of Comprehensive Income
	Remeasurements of pension plans and other post-employment benefit plans		32		(43)
	Net change in cash flow hedges		(86)		44
	Net fair value change attributable to credit risk on financial liabilities designated at fair value through profit or loss		(135)		(63)
	Other		(4)		(9)
			(193)		(71)
Income taxes			728		507

 

 

The breakdown of the income tax expense is as follows.

 

Year ended October 31		2024		2023(1)
Current taxes		849		770
Deferred taxes		(121)		(263)
		728		507

 

(1)       Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these Consolidated Financial Statements.

(2)       During the year ended October 31, 2023, the Bank had recorded a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as an $8 million tax recovery related to the 1.5% increase in the statutory tax rate, which included the impact related to current and deferred taxes for fiscal 2022.

(3)       As at October 31, 2023, as a result of adjustments arising from the adoption of IFRS 17, an $18 million deferred tax asset has been recorded to Retained earnings in the Consolidated Statement of Changes in Equity. For additional information, see Note 2 to these Consolidated Financial Statements.

 

 

 

The temporary differences and tax loss carryforwards resulting in deferred tax assets and liabilities are as follows. 

 

			As at October 31				Year ended October 31				Year ended October 31
			Consolidated Balance Sheet				Consolidated Statement of Income				Consolidated Statement of Comprehensive Income
			2024		2023(1)		2024		2023(1)		2024		2023
Deferred tax assets
Allowances for credit losses			410		314		96		79		−		−
Deferred expenses			501		362		139		45		−		−
Defined benefit liability - Other post-employment
	benefit plans		39		36		−		2		3		(4)
Investments in associates			−		−		−		(23)		−		−
Leases liabilities			95		108		(13)		(10)		−		−
Deferred revenue			111		91		20		29		−		−
Tax loss carryforwards			48		50		(2)		15		−		−
Other items(2)(3)			43		63		(35)		13		(4)		−
			1,247		1,024		205		150		(1)		(4)
Deferred tax liabilities
Premises and equipment and intangible assets			(233)		(225)		(8)		87		−		−
Defined benefit asset - Pension plans			(126)		(89)		−		(3)		(37)		41
Investments in associates			(14)		(12)		(2)		(2)		−		(8)
Other items			(115)		(60)		(57)		11		2		(27)
			(488)		(386)		(67)		93		(35)		6
Net deferred tax assets (liabilities)			759		638		138		243		(36)		2

 

(1)       Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these Consolidated Financial Statements.

(2)       As at October 31, 2024, the Consolidated Balance Sheet included a $29 million deferred tax asset related to the outstanding stock options considered as non-qualified securities for the purpose of the Income tax act. For the year ended October 31, 2024, a tax saving of $19 million is recorded under Contributed surplus in the Consolidated Statement of Changes in Equity.

(3)       As at October 31, 2023, as a result of adjustments arising from the adoption of IFRS 17, a $32 million deferred tax asset has been recorded, of which $18 million was to Retained earnings in the Consolidated Statement of Changes in Equity and $14 million to Income taxes in the Consolidated Statement of Income. For additional information, see Note 2 to these Consolidated Financial Statements.

 

Net deferred tax assets are included in Other assets and net deferred tax liabilities are included in Other liabilities.

 

As at October 31		2024		2023(1)
Deferred tax assets		828		666
Deferred tax liabilities		(69)		(28)
		759		638

 

(1)       Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these Consolidated Financial Statements.

 

According to forecasts, which are based on information available as at October 31, 2024, the Bank believes that the results of future operations will likely generate sufficient taxable income to utilize all the deferred tax assets before they expire.

 

As at October 31, 2024, the total amount of temporary differences, unused tax loss carryforwards, and unused tax credits for which no deferred tax asset has been recognized was $547 million ($536 million as at October 31, 2023).

 

As at October 31, 2024, the total amount of temporary differences related to investments in subsidiaries, associates, and joint ventures for which no deferred tax liability has been recognized was $7,626 million ($5,762 million as at October 31, 2023).

Note 26 - Income Taxes (cont.)

 

The following table provides a reconciliation of the Bank's income tax rate.

Year ended October 31				2024				2023(1)
				$		%		$		%
Income before income taxes				4,777		100.0		3,908		100.0
Income taxes at Canadian statutory income tax rate				1,338		28.0		1,094		28.0
Reduction in income tax rate due to
	Tax-exempt income from securities			(141)		(3.0)		(310)		(7.8)
	Non-taxable portion of capital gains			−		−		(1)		−
	Impact of enacted tax measures(2)			−		−		24		0.6
	Tax rates of subsidiaries, foreign entities and associates			(238)		(5.0)		(178)		(4.5)
	Other items			2		−		(10)		(0.3)
				(377)		(8.0)		(475)		(12.0)
Income taxes reported in the Consolidated Statement of Income and
	effective income tax rate			961		20.0		619		16.0

 

(1)       Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these Consolidated Financial Statements.

(2)       During the year ended October 31, 2023, the Bank had recorded a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as an $8 million tax recovery related to the 1.5% increase in the statutory tax rate, which included the impact related to current and deferred taxes for fiscal 2022.

 

Notice of Assessment

 

 

In April 2024, the Bank was reassessed by the Canada Revenue Agency (CRA) for additional income tax and interest of approximately $110 million (including estimated provincial tax and interest) in respect of certain Canadian dividends received by the Bank during the 2019 taxation year.

 

In prior fiscal years, the Bank had been reassessed for additional income tax and interest of approximately $965 million (including provincial tax and interest) in respect of certain Canadian dividends received by the Bank during the 2012-2018 taxation years.

 

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

 

In October 2023, the Bank filed a notice of appeal with the Tax Court of Canada, and the matter is now in litigation. The CRA may issue reassessments to the Bank for taxation years subsequent to 2019 in regard to certain activities similar to those that were the subject of the above-mentioned reassessments. The Bank remains confident that its tax position was appropriate and intends to vigorously defend its position. As a result, no amount has been recognized in the Consolidated Financial Statements as at October 31, 2024.

 

Canadian Government's 2022 Tax Measures

 

 

On November 4, 2022, the Government of Canada introduced Bill C-32 - An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 3, 2022 and certain provisions of the budget tabled in Parliament on April 7, 2022 to implement tax measures applicable to certain entities of banking and life insurer groups, as presented in its April 7, 2022 budget. These tax measures included the Canada Recovery Dividend (CRD), which is a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as a 1.5% increase in the statutory tax rate. On December 15, 2022, Bill C-32 received royal assent. Given that these tax measures had been enacted as at January 31, 2023, a $32 million tax expense for the CRD and an $8 million tax recovery for the tax rate increase, including the impact related to current and deferred taxes for fiscal 2022, were recognized in the Consolidated Financial Statements during the year ended October 31, 2023.

 

 

Other Tax Measures

 

 

On November 30, 2023, the Government of Canada introduced Bill C-59 - An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023 to implement tax measures applicable to the Bank. The measures include the denial of the deduction in respect of dividends received after 2023 on shares that are mark-to-market property for tax purposes (except for dividends received on "taxable preferred shares" as defined in the Income Tax Act), as well as the application of a 2% tax on the net value of equity repurchases occurring as of January 1, 2024. On June 20, 2024, Bill C-59 received royal assent and these tax measures were enacted at the reporting date. The Consolidated Financial Statements reflect the denial of the deduction in respect of the dividends covered by Bill C-59 since January 1, 2024.
 
On May 2, 2024, the Government of Canada introduced Bill C-69 - An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024. The bill includes the Pillar 2 rules (global minimum tax) published by the Organisation for Economic Co-operation and Development (OECD) that will apply to fiscal years beginning on or after December 31, 2023 (November 1, 2024 for the Bank). On June 20, 2024, Bill C-69 received royal assent. To date, the Pillar 2 rules have been included in a bill or enacted in certain jurisdictions where the Bank operates. The Pillar 2 rules do not apply to this fiscal year. The Bank is still assessing its income tax exposure arising from these rules but estimates that the impact on its effective income tax rate would be an increase of approximately 1% to 2%. During the years ended October 31, 2024 and 2023, the Bank applied the exception to the recognition and disclosure of information of deferred tax assets and liabilities arising from the Pillar 2 rules in the jurisdictions where they have been included in a bill or enacted.      

 

 

 

Note 27 - Earnings Per Share

 

 

Diluted earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding after taking into account the dilution effect of stock options using the treasury stock method and any gain (loss) on the redemption of preferred shares.

 

Year ended October 31			2024		2023(1)
Basic earnings per share
Net income attributable to the Bank's shareholders and holders of other equity instruments			3,817		3,291
Dividends on preferred shares and distributions on other equity instruments			154		141
Net income attributable to common shareholders			3,663		3,150
Weighted average basic number of common shares outstanding (thousands)			339,733		337,660
Basic earnings per share (dollars)			10.78		9.33
Diluted earnings per share
Net income attributable to common shareholders			3,663		3,150
Weighted average basic number of common shares outstanding (thousands)			339,733		337,660
Adjustment to average number of common shares (thousands)
	Stock options(2)		3,106		3,108
Weighted average diluted number of common shares outstanding (thousands)			342,839		340,768
Diluted earnings per share (dollars)			10.68		9.24

 

(1)       Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these Consolidated Financial Statements.

(2)       For the years ended October 31, 2024 and 2023, given that the exercise price of the options was lower than the average price of the Bank's common shares, no options were excluded from the diluted earnings per share calculation.

 

 

 

Note 28 - Guarantees, Commitments and Contingent Liabilities

 

 

Guarantees

 

The maximum potential amount of future payments represents the maximum risk of loss if there were a total default by the guaranteed parties, without consideration of recoveries under recourse provisions or insurance policies or from collateral held or pledged. The maximum potential amount of future payments under significant guarantees issued by the Bank is presented in the following table.

 

As at October 31		2024		2023
Letters of guarantee(1)		9,302		8,339
Backstop liquidity, credit enhancement facilities and other(1)		11,065		10,101
Securities lending		59		147

 

(1)       For additional information on allowances for credit losses related to off-balance-sheet commitments, see Note 8 to these Consolidated Financial Statements.

 

Letters of Guarantee

In the normal course of business, the Bank issues letters of guarantee. These letters of guarantee represent irrevocable commitments that the Bank will make payments in the event that a client cannot meet its obligations to third parties. The Bank's policy for requiring collateral security with respect to letters of guarantee is similar to that for loans. Generally, the term of these letters of guarantee is less than two years.

 

Backstop Liquidity and Credit Enhancement Facilities

Facilities to Multi-Seller Conduits

The Bank administers multi-seller conduits that purchase financial assets from clients and finance those purchases by issuing asset-backed commercial paper. The Bank provides backstop liquidity facilities to these multi-seller conduits. As at October 31, 2024, the notional amount of the global-style backstop liquidity facilities totalled $5.5 billion ($4.6 billion as at October 31, 2023), representing the total amount of commercial paper outstanding.

 

These backstop liquidity facilities can be drawn if the conduits are unable to access the commercial paper market, even if there is no general market disruption. These facilities have terms of less than one year and can be periodically renewed. The terms and conditions of these backstop liquidity facilities do not require the Bank to advance money to the conduits if the conduits are insolvent or involved in bankruptcy proceedings or to fund non-performing assets beyond the amount of the available credit enhancements. The backstop liquidity facilities provided by the Bank have not been drawn to date.

 

The Bank also provides credit enhancement facilities to these multi-seller conduits. These facilities have terms of less than one year and are automatically renewable unless the Bank sends a non-renewal notice. As at October 31, 2024 and 2023, the committed notional value for these facilities was $30 million. To date, the credit enhancement facilities provided by the Bank have not been drawn.

 

The maximum risk of loss for the Bank cannot exceed the total amount of commercial paper outstanding, i.e., $5.6 billion as at October 31, 2024 ($4.6 billion as at October 31, 2023). As at October 31, 2024, the Bank held $63 million ($67 million as at October 31, 2023) of this commercial paper and, consequently, the maximum potential amount of future payments, taking into account the credit enhancement facilities, was $5.5 billion ($4.5 billion as at October 31, 2023).

 

CDCC Overnight Liquidity Facility

Canadian Derivatives Clearing Corporation (CDCC) acts as a central clearing counterparty for multiple financial instrument transactions in Canada. Certain fixed-income clearing members of CDCC have provided an equally shared committed and uncommitted global overnight liquidity facility for the purpose of supporting CDCC in its clearing activities of securities purchased under reverse repurchase agreements or sold under repurchase agreements. The objective of this facility is to maintain sufficient liquidity in the event of a clearing member's default. As a fixed-income clearing member providing support to CDCC, the Bank provided a liquidity facility. As at October 31, 2024, the notional amount of the overnight uncommitted liquidity facility amounted to $5.6 billion ($5.6 billion as at October 31, 2023). As at October 31, 2024 and 2023, no amount had been drawn.

 

Securities Lending

Under securities lending agreements that the Bank has entered into with certain clients who have entrusted it with the safekeeping of their securities, the Bank lends the securities to third parties and indemnifies its clients in the event of loss. To protect itself against any contingent loss, the Bank obtains, as security from the borrower, a cash amount or extremely liquid marketable securities with a fair value greater than that of the securities loaned. No amount has been recognized in the Consolidated Balance Sheet with respect to potential indemnities resulting from securities lending agreements.

 

Other Indemnification Agreements

In the normal course of business, including securitization transactions and discontinuances of businesses and operations, the Bank enters into numerous contractual agreements under which it undertakes to compensate the counterparty for costs incurred as a result of litigation, changes in laws and regulations (including tax legislation), claims with respect to past performance, incorrect representations or the non-performance of certain restrictive covenants. The Bank also undertakes to indemnify any person acting as a director or officer or performing a similar function within the Bank or one of its subsidiaries or another entity, at the request of the Bank, for all expenses incurred by that person in proceedings or investigations to which he or she is party in that capacity. Moreover, as a member of a securities transfer network and pursuant to the membership agreement and the regulations governing the operation of the network, the Bank granted collateral in favour of the Bank of Canada to guarantee any obligation of the Bank towards the Bank of Canada that could result from the Bank's participation in the securities transfer network. The durations of the indemnification agreements vary according to circumstance; as at October 31, 2024 and 2023, given the nature of the agreements, the Bank is unable to make a reasonable estimate of the maximum potential liability it could be required to pay to counterparties. No amount related to these agreements has been recognized in the Consolidated Balance Sheet.

 

Commitments

 

Credit Instruments

In the normal course of business, the Bank enters into various off-balance-sheet commitments. The credit instruments used to meet the financing needs of its clients represent the maximum amount of additional credit that the Bank could be obligated to extend if the commitments were fully drawn.

 

 

As at October 31		2024		2023
Letters of guarantee(1)		9,302		8,339
Documentary letters of credit(2)		158		157
Credit card receivables(3)		10,515		9,802
Commitments to extend credit(3)		100,280		90,706

 

(1)       See Letters of Guarantee on the previous page.

(2)       Documentary letters of credit are documents issued by the Bank and used in international trade to enable a third party to present a payment request to the Bank for up to an amount established under specific terms and conditions; these instruments are collateralized by the delivery of the goods to which they are related.

(3)       Credit card receivables and commitments to extend credit represent unused portions of authorizations to extend credit, under certain conditions, in the form of loans or bankers' acceptances.

 

Financial Assets Received as Collateral

As at October 31, 2024, the fair value of financial assets received as collateral that the Bank was authorized to sell or repledge was $117.9 billion ($87.9 billion as at October 31, 2023). Given their characteristics, these financial assets received as collateral are held in a portfolio of liquid assets and consist of securities related to securities financing and derivative transactions as well as securities purchased under reverse repurchase agreements and securities borrowed.

 

Other Commitments

The Bank acts as an investor in investment banking activities whereby it enters into agreements to finance external private equity funds and investments in equity and debt securities at market value at the time the agreements are signed. In connection with these activities, the Bank had commitments to invest up to $161 million as at October 31, 2024 ($127 million as at October 31, 2023). In addition, through one of its subsidiaries, the Bank purchases retail loans originated by other financial institutions at market value at the time of purchase. As at October 31, 2024, the Bank had commitments to purchase loans of $148 million (negligible amount as at October 31, 2023).

 

 

Pledged Assets

In the normal course of business, the Bank pledges securities and other assets as collateral. A breakdown of encumbered assets pledged as collateral is provided in the following table. These transactions are concluded in accordance with standard terms and conditions.

 

As at October 31			2024		2023
Assets pledged to
	Bank of Canada		333		300
	Direct clearing organizations(1)		15,391		3,046
Assets pledged in relation to
	Derivative financial instrument transactions		165		6,628
	Borrowing, securities lending and securities sold under reverse repurchase agreements		41,669		85,673
	Securitization transactions		28,230		25,088
	Covered bonds(2)		12,514		12,120
	Other		2,377		752
Total			100,679		133,607

 

(1)       Includes assets pledged as collateral for activities in the systemically important payment system (designated as Lynx) as at October 31, 2024 and 2023.

(2)       The Bank has a covered bond program. For additional information, see Notes 14 and 29 to these Consolidated Financial Statements.

 

 

Note 28 - Guarantees, Commitments and Contingent Liabilities (cont.)

 

Contingent Liabilities

 

 

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 proceeding involving the Bank are as follows:

 

 

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.

 

 

Note 29 - Structured Entities

 

 

A structured entity is an entity created to accomplish a narrow and well-defined objective and is designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate solely to administrative tasks and the relevant activities are directed by means of contractual arrangements. Structured entities are assessed for consolidation in accordance with the accounting treatment described in Note 1 to these Consolidated Financial Statements. The Bank's maximum exposure to loss resulting from its interests in these structured entities consists primarily of the investments in these entities, the fair value of derivative financial instrument contracts entered into with them, and the backstop liquidity and credit enhancement facilities granted to certain structured entities.

 

In the normal course of business, the Bank may enter into financing transactions with third-party structured entities, including commercial loans, reverse repurchase agreements, prime brokerage margin lending, and similar collateralized lending transactions. While such transactions expose the Bank to the counterparty credit risk of the structured entities, this exposure is mitigated by the collateral related to these transactions. The Bank typically has neither power nor significant variable returns resulting from financing transactions with structured entities and does not consolidate such entities. Financing transactions with third-party-sponsored structured entities are included in the Bank's Consolidated Financial Statements and are not included in the table accompanying this note on the next page.

 

Non-Consolidated Structured Entities

Multi-Seller Conduits

The Bank administers multi-seller conduits that purchase financial assets from clients and finance those purchases by issuing commercial paper backed by the assets acquired. Clients use these multi-seller conduits to diversify their funding sources and reduce borrowing costs, while continuing to manage the financial assets and providing some amount of first-loss protection. Notes issued by the conduits and held by third parties provide additional credit loss protection. The Bank acts as a financial agent and provides these conduits with administrative and transaction structuring services as well as backstop liquidity and credit enhancement facilities under the commercial paper program. These facilities are presented and described in Note 28. The Bank has concluded derivative financial instrument contracts with these conduits, the fair value of which is presented in the Bank's Consolidated Balance Sheet. Although the Bank has the ability to direct the relevant activities of these conduits, it cannot use its power to affect the amount of the returns it obtains, as it acts as an agent. Consequently, the Bank does not control these conduits and does not consolidate them. 

 

Investment Funds

The Bank enters into derivative or other financial instrument contracts with third parties to provide them with the desired exposure to certain investment funds. The Bank economically hedges the risks related to these derivatives by investing in those investment funds. The Bank can also hold economic interests in certain investment funds as part of its investing activities. In addition, the Bank is sponsor and investment manager of mutual funds in which it has insignificant or no interest. The Bank does not control the funds where its holdings are not significant given that, in these circumstances, the Bank either acts only as an agent or does not have any power over the relevant activities. In both cases, it does not have significant exposure to the variable returns of the funds. Therefore, the Bank does not consolidate these funds.

 

 

Private Investments

The Bank invests in several limited liability partnerships and other incorporated entities. These investment companies in turn invest in operating companies with a view to reselling these investments at a profit over the medium or long term. The Bank does not intervene in the operations of these entities; its only role is that of an investor. Consequently, it does not control these companies and does not consolidate them. 

 

Third-Party Structured Entities

The Bank has invested in third-party structured entities, some of which are asset-backed. The underlying assets consist of residential mortgages, consumer loans, equipment loans, leases, and securities. The Bank does not have the ability to direct the relevant activities of these structured entities and has no exposure to their variable returns, other than the right to receive interest income and dividend income from its investments. Consequently, the Bank does not control these structured entities and does not consolidate them.

 

 

The following table presents the carrying amounts of the assets and liabilities relating to the Bank's interests in non-consolidated structured entities, the Bank's maximum exposure to loss from these interests, as well as the total assets of these structured entities. The structured entity Canada Housing Trust is not presented. For additional information, see Note 9 to these Consolidated Financial Statements.

 

						As at October 31, 2024
				Multi-seller conduits(1)		Investment funds(2)		Private investments(3)		Third-party structured entities(4)
Assets in the Consolidated Balance Sheet
	Securities at fair value through profit or loss			63		174		73		−
	Securities at amortized cost			−		−		−		1,687
	Derivative financial instruments			−		−		−		24
				63		174		73		1,711
As at October 31, 2023				67		1,042		92		3,447
Liabilities in the Consolidated Balance Sheet
	Derivative financial instruments			(13)		−		−		(4)
				(13)		−		−		(4)
As at October 31, 2023				(82)		−		−		(90)
Maximum exposure to loss
	Securities			63		174		73		1,711
	Liquidity, credit enhancement facilities and commitments			5,513		−		−		438
				5,576		174		73		2,149
As at October 31, 2023				4,616		1,042		92		3,916
Total assets of structured entities				5,553		1,266		390		6,418
As at October 31, 2023				4,587		2,583		651		11,390

 

(1)       The main underlying assets, located in Canada, are residential mortgages, automobile loans, automobile inventory financings, and other receivables. As at October 31, 2024, the notional committed amount of the global-style liquidity facilities totalled $5.6 billion ($4.6 billion as at October 31, 2023), representing the total amount of commercial paper outstanding. The Bank also provides series-wide credit enhancement facilities for a notional committed amount of $30 million ($30 million as at October 31, 2023). The maximum exposure to loss cannot exceed the amount of commercial paper outstanding. As at October 31, 2024, the Bank held $63 million in commercial paper ($67 million as at October 31, 2023) and, consequently, the maximum potential amount of future payments as at October 31, 2024 was limited to $5.5 billion ($4.5 billion as at October 31, 2023), which represents the undrawn liquidity and credit enhancement facilities.

(2)       The underlying assets are various financial instruments and are presented on a net asset basis. Certain investment funds are in a trading portfolio.

(3)       The underlying assets are private investments. The amount of total assets of the structured entities corresponds to the amount for the most recent available period.

(4)       The underlying assets are residential mortgages, consumer loans, equipment loans, leases, and securities.

 

Consolidated Structured Entities

Securitization Entity for the Bank's Credit Card Receivables

In April 2015, the Bank set up Canadian Credit Card Trust II (CCCT II) to continue its credit card securitization program on a revolving basis and to use the entity for capital management and funding purposes.

 

The Bank provides first-loss protection against the losses, since it retains the excess spread from the portfolio of sold receivables. The excess spread represents the residual net interest income after all the expenses related to this structure have been paid. The Bank also provides second-loss protection as it holds subordinated notes issued by CCCT II. In addition, the Bank acts as an administrative agent and servicer and as such is responsible for the daily administration and management of CCCT II's credit card receivables. The Bank therefore has the ability to direct the relevant activities of CCCT II and can exercise its power to affect the amount of returns it obtains. Consequently, the Bank controls CCCT II and consolidates it.

 

Multi-Seller Conduit

The Bank administers a multi-seller conduit that purchases various financial assets from clients and finances those purchases by issuing debt securities (including commercial paper) backed by the assets acquired. The clients use this multi-seller conduit to diversify their funding sources and reduce borrowing costs, while continuing to manage the financial assets and providing some amount of first-loss protection. The Bank holds the sole note issued by the conduit and has concluded a derivative financial instrument contract with the conduit. The Bank controls the relevant activities of this conduit through its involvement as a financial agent, agent for administrative and transaction structuring services as well as investor in the conduit's sole note. The Bank's functions and investment in the conduit confer to it decision-making power over the composition of assets acquired by the conduit and the selection of the seller as well as some exposure to the conduit's variable returns. Therefore, the Bank consolidates this conduit.

Note 29 - Structured Entities (cont.)

 

Investment Funds

The Bank enters into derivative or other financial instrument contracts with third parties to provide them with the desired exposure to certain investment funds. The Bank economically hedges the risks related to these derivatives by investing in those investment funds. The Bank can also hold economic interests in certain investment funds as part of its investing activities. The Bank controls the relevant activities of certain funds through its involvement as an investor and its significant exposure to their variable returns. Therefore, the Bank consolidates these funds.

 

Covered Bonds

NBC Covered Bond Guarantor (Legislative) Limited Partnership

In December 2013, the Bank established the covered bond legislative program under which covered bonds are issued. It therefore created NBC Covered Bond Guarantor (Legislative) Limited Partnership (the Guarantor) to guarantee payment of the principal and interest owed to the bondholders. The Bank sold uninsured residential mortgages to the Guarantor and granted it loans to facilitate the acquisition of these assets. The Bank acts as manager of the partnership and has decision-making authority over its relevant activities in accordance with the contractual terms governing the covered bond legislative program. In addition, the Bank is able, in accordance with the contractual terms governing the covered bond legislative program, to affect the variable returns of the partnership, which are directly related to the return on the mortgage loan portfolio and the interest on the loans from the Bank. Consequently, the Bank controls the partnership and consolidates it.

 

Third-Party Structured Entities

In 2018, the Bank, through one of its subsidiaries, provided financing to a third-party structured entity in exchange for a 100% interest in a loan portfolio, the sole asset held by that entity. The Bank controls and therefore consolidates the structured entity, as it has the ability to direct the entity's relevant activities through its involvement in the decision-making process. The Bank is also exposed to the entity's variable returns.

 

The following table presents the Bank's investments and other assets in the consolidated structured entities as well as the total assets of these entities.

 

As at October 31			2024				2023
			Investments and other assets		Total assets(1)		Investments and other assets		Total assets(1)
Consolidated structured entities
Securitization entity for the Bank's credit card receivables(2)(3)			3,176		3,243		2,176		2,272
Multi-seller conduit(4)			2,022		2,022		1,655		1,655
Investment funds(5)			47		47		26		26
Covered bonds(6)			21,779		22,288		20,458		20,869
Third-party structured entities(7)			124		124		147		147
			27,148		27,724		24,462		24,969

 

(1)       There are restrictions, arising essentially from regulatory requirements, corporate or securities laws, and contractual arrangements, that limit the ability of some of the Bank's consolidated structured entities to transfer funds to the Bank.

(2)       The underlying assets are credit card receivables.

(3)       The Bank's investment is presented net of third-party holdings.

(4)       The underlying assets, located in Canada, are mainly residential mortgages.

(5)       The underlying assets are various financial instruments and are presented on a net asset basis. Certain investment funds are in a trading portfolio.

(6)       The underlying assets are uninsured residential mortgage loans of the Bank. The average maturity of these underlying assets is two years. As at October 31, 2024, the total amount of transferred mortgage loans was $21.9 billion ($20.6 billion as at October 31, 2023), and the total amount of covered bonds of $11.4 billion was recognized in Deposits in the Consolidated Balance Sheet ($10.9 billion as at October 31, 2023). For additional information, see Note 14 to these Consolidated Financial Statements.

(7)       The underlying assets consist of a loan portfolio.

 

Note 30 - Related Party Disclosures

 

 

In the normal course of business, the Bank provides various banking services to related parties and enters into contractual agreements and other operations with related parties. The Bank considers the following to be related parties:

 

·     its key officers and directors and members of their immediate family, i.e., spouses and children under 18 living in the same household;

·     entities over which its key officers and directors and their immediate family have control or significant influence through their significant voting power;

·     the Bank's associates and joint ventures;

·     the Bank's pension plans (for additional information, see Note 25 to these Consolidated Financial Statements).

 

According to the established definition, the Bank's key officers are those persons having authority and responsibility for planning, directing, and controlling the Bank's activities, directly or indirectly.

 

Related Party Transactions

 

As at October 31
		Key officers and directors(1)					Related entities
			2024		2023		2024			2023
Assets
	Mortgage loans and other loans		21		24		60	(2)		223	(2)
Liabilities
	Deposits		47		45		559	(3)		230	(3)
	Other		−		−		2			3

 

(1)       As at October 31, 2024, key officers and directors and their immediate family members were holding $38 million of the Bank's common and preferred shares ($28 million as at October 31, 2023).

(2)       As at October 31, 2024, mortgage loans and other loans consisted of: (i) no amount in loans to the Bank's associates ($7 million as at October 31, 2023) and (ii) $60 million in loans to entities over which the Bank's key officers or directors or their immediate family members exercise control or significant influence through significant voting power ($216 million as at October 31, 2023).

(3)       As at October 31, 2024, deposits consisted of: (i) no amount in deposits to the Bank's associates ($1 million as at October 31, 2023) and (ii) $559 million in deposits from entities over which the Bank's key officers or directors and their immediate family members exercise control or significant influence through significant voting power ($229 million as at October 31, 2023).

 

The contractual agreements and other transactions with related entities as well as with directors and key officers are entered into under conditions similar to those offered to non-related third parties. These agreements did not have a significant impact on the Bank's results. The Bank also offers a deferred stock unit plan to directors who are not Bank employees. For additional information, see Notes 10, 24 and 29 to these Consolidated Financial Statements.

 

Compensation of Key Officers and Directors

 

Year ended October 31		2024		2023(1)
Compensation and other short-term and long-term benefits		28		26
Share-based payments		27		28

  

(1)       The amounts as at October 31, 2023 have been revised compared to those previously presented.

Note 30 - Related Party Disclosures (cont.)

 

Principal Subsidiaries of the Bank⁽¹⁾

 

As at October 31, 2024

Name

Business activity

Principal office address(2)

Voting shares(3)

Investment at cost

Canada and United States

National Bank Acquisition Holding Inc.

Holding company

Montreal, Canada

100%

1,257

National Bank Financial Inc.

Investment dealer

Montreal, Canada

100%

NBF International Holdings Inc.

Holding company

Montreal, Canada

100%

National Bank of Canada Financial Group Inc.

Holding company

New York, NY, United States

100%

Credigy Ltd.

Holding company

Atlanta, GA, United States

100%

National Bank of Canada Financial Inc.

Investment dealer

New York, NY, United States

100%

National Bank Investments Inc.

Mutual funds dealer

Montreal, Canada

100%

National Bank Life Insurance Company

Insurance

Montreal, Canada

100%

Natcan Trust Company

Trustee

Montreal, Canada

100%

National Bank Trust Inc.

Trustee

Montreal, Canada

100%

195

National Bank Realty Inc.

Real estate

Montreal, Canada

100%

80

NatBC Holding Corporation

Holding company

Hollywood, FL, United States

100%

44

Natbank, National Association

Commercial bank

Hollywood, FL, United States

100%

Flinks Technology Inc.

Information technology

Montreal, Canada

97%

150

Other countries

Natcan Global Holdings Ltd.

Holding company

Sliema, Malta

100%

22

NBC Global Finance Limited

Investment services

Dublin, Ireland

100%

NBC Financial Markets Asia Limited

Investment dealer

Hong Kong, China

100%

5

Advanced Bank of Asia Limited

Commercial bank

Phnom Penh, Cambodia

100%

1,241

ATA IT Ltd.

Information technology

Bangkok, Thailand

100%

3

Natcan Insurance Company SCC

Insurance

Bridgetown, Barbados

100%

87

NBC Paris S.A.

Investment services

Paris, France

100%

4

 

(1)       Excludes consolidated structured entities. For additional information, see Note 29 to these Consolidated Financial Statements.

(2)       All subsidiaries were founded or incorporated under the laws of the state, province or country where their principal office is located, except for National Bank of Canada Financial Group Inc., National Bank of Canada Financial Inc. and NatBC Holding Corporation, which were incorporated under the laws of the State of Delaware, United States, and Credigy Ltd., which was incorporated under the laws of the State of Nevada, United States.

(3)       The Bank's percentage of voting rights in these subsidiaries.

 

 

 

Note 31 - Financial Instruments Risk Management

 

 

The Bank is exposed to credit risk, market risk, and liquidity and funding risk. The Bank's objectives, policies, and procedures for managing risk and the risk measurement methods are presented in the Risk Management section of the MD&A for the year ended October 31, 2024. Text in grey shading and tables identified with an asterisk (*) in the Risk Management section of the MD&A for the year ended October 31, 2024 are integral parts of these Consolidated Financial Statements.

 

Residual Contractual Maturities of Balance Sheet Items and Off-Balance-Sheet Commitments

 

The following tables present balance sheet items and off-balance-sheet commitments by residual contractual maturity as at October 31, 2024 and 2023. The information gathered from this maturity analysis is a component of liquidity and funding management. However, this maturity profile does not represent how the Bank manages its interest rate risk nor its liquidity risk and funding needs. The Bank considers factors other than contractual maturity when assessing liquid assets or determining expected future cash flows.

 

In the normal course of business, the Bank enters into various off-balance-sheet commitments. The credit instruments used to meet the funding needs of its clients represent the maximum amount of additional credit that the Bank could be obligated to extend if the commitments were fully drawn.

 

The Bank also has future minimum commitments under leases for premises as well as under other contracts, mainly commitments to purchase loans and contracts for outsourced information technology services. Most of the lease commitments are related to operating leases. 

																	As at October 31, 2024
					1 month or less		Over 1 month to 3 months		Over 3 months to 6 months		Over 6 months to 9 months		Over 9 months to 12 months		Over 1 year to 2 years		Over 2 years to 5 years		Over 5 years		No specified maturity		Total
Assets
Cash and deposits
	with financial institutions				20,300		868		458		395		146		−		−		−		9,382		31,549
Securities
	At fair value through
		profit or loss			155		179		692		1,173		1,691		4,018		10,420		9,930		87,677		115,935
	At fair value through
		other comprehensive income			14		97		263		33		34		2,863		5,688		4,964		666		14,622
	At amortized cost				232		756		545		931		629		2,748		7,170		1,597		−		14,608
					401		1,032		1,500		2,137		2,354		9,629		23,278		16,491		88,343		145,165
Securities purchased under
	reverse repurchase
	agreements and
	securities borrowed				5,525		2,900		2,222		881		−		696		−		−		4,041		16,265
Loans(1)
	Residential mortgage				1,901		2,012		3,466		4,431		4,762		23,671		44,223		9,993		550		95,009
	Personal				861		865		1,648		1,843		1,890		7,957		12,050		6,086		13,683		46,883
	Credit card																				2,761		2,761
	Business and government				12,533		5,621		4,733		4,747		5,588		10,704		18,364		6,545		30,885		99,720
	Allowances for credit losses																				(1,341)		(1,341)
					15,295		8,498		9,847		11,021		12,240		42,332		74,637		22,624		46,538		243,032
Other
	Derivative financial instruments				2,619		1,950		1,187		643		375		1,707		1,576		2,252		−		12,309
	Investments in associates and
		joint ventures																			40		40
	Premises and equipment																				1,868		1,868
	Goodwill																				1,522		1,522
	Intangible assets																				1,233		1,233
	Other assets(1)				3,080		213		757		1,298		221		855		426		102		2,291		9,243
					5,699		2,163		1,944		1,941		596		2,562		2,002		2,354		6,954		26,215
					47,220		15,461		15,971		16,375		15,336		55,219		99,917		41,469		155,258		462,226

 

(1)       Amounts collectible on demand are considered to have no specified maturity.

Note 31 - Financial Instruments Risk Management (cont.)

 

																	As at October 31, 2024
					1 month or less		Over 1 month to 3 months		Over 3 months to 6 months		Over 6 months to 9 months		Over 9 months to 12 months		Over 1 year to 2 years		Over 2 years to 5 years		Over 5 years		No specified maturity		Total
Liabilities and equity
Deposits(1)(2)
	Personal				4,022		3,808		4,840		5,342		4,810		6,856		13,857		7,170		44,476		95,181
	Business and government				34,782		14,521		18,716		10,445		6,927		9,649		37,905		6,273		93,512		232,730
	Deposit-taking institutions				803		101		364		1,188		401		11		2		26		2,738		5,634
					39,607		18,430		23,920		16,975		12,138		16,516		51,764		13,469		140,726		333,545
Other
	Obligations related
		to securities sold short(3)			124		260		396		113		64		1,141		2,323		4,354		2,098		10,873
	Obligations related to
		securities sold under
		repurchase agreements and
		securities loaned			19,554		2,510		3,915		3,481		−		1,073		−		−		7,644		38,177
	Derivative financial instruments				1,875		3,134		2,183		509		372		1,844		1,886		3,957		−		15,760
	Liabilities related to transferred
		receivables(4)			−		1,897		1,216		1,543		197		4,169		8,872		10,483		−		28,377
	Securitization - Credit card(5)				49		−		−		−		−		−		−		−		−		49
	Lease liabilities(5)				6		13		19		19		18		72		176		149		−		472
	Other liabilities - Other items(1)(5)				1,674		199		238		10		51		65		79		170		5,679		8,165
					23,282		8,013		7,967		5,675		702		8,364		13,336		19,113		15,421		101,873
Subordinated debt					−		−		−		−		−		−		−		1,258		−		1,258
Equity																					25,550		25,550
					62,889		26,443		31,887		22,650		12,840		24,880		65,100		33,840		181,697		462,226
Off-balance-sheet commitments
	Letters of guarantee and
		documentary letters of credit			80		1,861		1,914		1,420		1,456		2,506		203		20		−		9,460
	Credit card receivables(6)																				10,515		10,515
	Backstop liquidity and credit
		enhancement facilities(7)			−		15		5,552		15		−		−		−		−		5,483		11,065
	Commitments to extend credit(8)				3,243		12,896		9,811		8,121		4,600		5,248		3,635		114		52,612		100,280
	Obligations related to:
		Lease commitments(9)			1		1		2		1		1		5		4		2		−		17
		Other contracts(10)			5		10		14		12		12		48		244		9		161		515

 

(1)       Amounts payable upon demand or notice are considered to have no specified maturity.

(2)       Deposits are presented in greater detail than in the Consolidated Balance Sheet.

(3)       Amounts are disclosed according to the residual contractual maturity of the underlying security.

(4)       These amounts mainly include liabilities related to the securitization of mortgage loans.

(5)       Other liabilities are presented in greater detail than in the Consolidated Balance Sheet.

(6)       These amounts are unconditionally revocable at the Bank's discretion at any time.

(7)       In the event of payment on one of the backstop liquidity facilities, the Bank will receive as collateral government bonds in an amount up to $5.6 billion.

(8)       These amounts include $48.6 billion that is unconditionally revocable at the Bank's discretion at any time.

(9)       These amounts include leases for which the underlying asset is of low value and leases other than for real estate of less than one year.

(10)    These amounts include $5 million in contractual commitments related to the head office building.

 

 

																	As at October 31, 2023(1)
					1 month or less		Over 1 month to 3 months		Over 3 months to 6 months		Over 6 months to 9 months		Over 9 months to 12 months		Over 1 year to 2 years		Over 2 years to 5 years		Over 5 years		No specified maturity		Total
Assets
Cash and deposits
	with financial institutions				25,374		448		354		50		216		−		−		−		8,792		35,234
Securities
	At fair value through
		profit or loss			694		258		1,663		1,758		2,260		3,667		10,823		12,813		66,058		99,994
	At fair value through
		other comprehensive income			3		30		154		224		426		538		4,548		2,660		659		9,242
	At amortized cost				4		158		508		338		1,399		4,110		4,713		1,352		−		12,582
					701		446		2,325		2,320		4,085		8,315		20,084		16,825		66,717		121,818
Securities purchased under
	reverse repurchase
	agreements and
	securities borrowed				2,275		1,641		716		72		416		693		−		−		5,447		11,260
Loans(2)
	Residential mortgage				1,409		1,250		1,990		3,126		2,990		15,339		51,112		9,089		542		86,847
	Personal				613		637		1,060		1,271		1,396		6,258		15,656		5,713		13,754		46,358
	Credit card																				2,603		2,603
	Business and government				21,406		4,262		4,007		3,204		2,783		6,695		11,322		5,414		25,099		84,192
	Customers' liability under
		acceptances			6,191		373		50		13		−		−		−		−		−		6,627
	Allowances for credit losses																				(1,184)		(1,184)
					29,619		6,522		7,107		7,614		7,169		28,292		78,090		20,216		40,814		225,443
Other
	Derivative financial instruments				2,040		1,982		1,367		1,197		611		1,696		2,399		6,224		−		17,516
	Investments in associates and
		joint ventures																			49		49
	Premises and equipment																				1,592		1,592
	Goodwill																				1,521		1,521
	Intangible assets																				1,256		1,256
	Other assets(2)				2,639		774		166		1,206		547		598		252		115		1,491		7,788
					4,679		2,756		1,533		2,403		1,158		2,294		2,651		6,339		5,909		29,722
					62,648		11,813		12,035		12,459		13,044		39,594		100,825		43,380		127,679		423,477

 

(1)       Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these Consolidated Financial Statements.

(2)       Amounts collectible on demand are considered to have no specified maturity.

 

Note 31 - Financial Instruments Risk Management (cont.)

 

																	As at October 31, 2023(1)
					1 month or less		Over 1 month to 3 months		Over 3 months to 6 months		Over 6 months to 9 months		Over 9 months to 12 months		Over 1 year to 2 years		Over 2 years to 5 years		Over 5 years		No specified maturity		Total
Liabilities and equity
Deposits(2)(3)
	Personal				4,648		3,722		4,491		6,056		5,145		8,398		11,635		4,164		39,624		87,883
	Business and government				32,642		10,044		17,495		4,271		3,498		9,127		15,768		5,058		99,425		197,328
	Deposit-taking institutions				646		408		32		109		18		8		15		33		1,693		2,962
					37,936		14,174		22,018		10,436		8,661		17,533		27,418		9,255		140,742		288,173
Other
	Acceptances				6,191		373		50		13		−		−		−		−		−		6,627
	Obligations related
		to securities sold short(4)			35		155		129		73		76		347		2,332		4,123		6,390		13,660
	Obligations related to
		securities sold under
		repurchase agreements and
		securities loaned			23,041		2,719		1,040		3,467		−		274		−		−		7,806		38,347
	Derivative financial instruments				1,912		2,697		1,186		1,086		467		2,415		3,068		7,057		−		19,888
	Liabilities related to transferred
		receivables(5)			−		1,760		829		2,142		618		3,915		8,678		7,092		−		25,034
	Securitization - Credit card(6)				−		−		−		−		−		48		−		−		−		48
	Lease liabilities(6)				9		28		25		24		23		83		197		128		−		517
	Other liabilities - Other items(2)(6)				1,417		306		174		7		27		37		58		105		4,720		6,851
					32,605		8,038		3,433		6,812		1,211		7,119		14,333		18,505		18,916		110,972
Subordinated debt					−		−		−		−		−		−		−		748		−		748
Equity																					23,584		23,584
					70,541		22,212		25,451		17,248		9,872		24,652		41,751		28,508		183,242		423,477
Off-balance-sheet commitments
	Letters of guarantee and
		documentary letters of credit			89		1,287		1,975		2,185		1,490		1,165		255		50		−		8,496
	Credit card receivables(7)																				9,802		9,802
	Backstop liquidity and credit
		enhancement facilities(8)			−		15		5,552		15		−		−		−		−		4,519		10,101
	Commitments to extend credit(9)				3,186		10,675		8,445		7,562		4,316		4,579		3,312		39		48,592		90,706
	Obligations related to:
		Lease commitments(10)			1		1		1		2		2		6		7		1		−		21
		Other contracts(11)			11		22		34		33		36		46		138		13		127		460

 

(1)       Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these Consolidated Financial Statements.

(2)       Amounts payable upon demand or notice are considered to have no specified maturity.

(3)       Deposits are presented in greater detail than in the Consolidated Balance Sheet.

(4)       Amounts have been disclosed according to the residual contractual maturity of the underlying security.

(5)       These amounts mainly include liabilities related to the securitization of mortgage loans.

(6)       Other liabilities are presented in greater detail than in the Consolidated Balance Sheet.

(7)       These amounts are unconditionally revocable at the Bank's discretion at any time.

(8)       In the event of payment on one of the backstop liquidity facilities, the Bank will receive as collateral government bonds in an amount up to $5.6 billion.

(9)       These amounts include $46.7 billion that is unconditionally revocable at the Bank's discretion at any time.

(10)    These amounts include leases for which the underlying asset is of low value and leases other than for real estate of less than one year.

(11)    These amounts include $0.1 billion in contractual commitments related to the portion under construction of the head office building.

 

 

Note 32 - Segment Disclosures

 

 

The Bank carries out its activities in four business segments, which are defined below. For presentation purposes, other activities are grouped in the Other heading. Each reportable segment is distinguished by services offered, type of clientele, and marketing strategy. The presentation of segment disclosures is consistent with the presentation adopted by the Bank for the fiscal year beginning November 1, 2023. This presentation reflects the retrospective application of the accounting policy changes arising from the adoption of IFRS 17. The figures for the 2023 quarters have been adjusted to reflect these accounting policy changes.

 

Personal and Commercial

The Personal and Commercial segment encompasses the banking, financing, and investing services offered to individuals, advisors and businesses as well as insurance operations.

 

Wealth Management

The Wealth Management segment comprises investment solutions, trust services, banking services, lending services and other wealth management solutions offered through internal and third-party distribution networks.

 

Financial Markets

The Financial Markets segment encompasses corporate banking and investment banking and financial solutions for large and mid-size corporations, public sector organizations, and institutional investors.

 

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

The USSF&I segment encompasses the specialty finance expertise provided by the Credigy subsidiary; the activities of the ABA Bank subsidiary, which offers financial products and services to individuals and businesses in Cambodia; and the activities of targeted investments in certain emerging markets.

 

Other

This heading encompasses treasury activities; liquidity management; Bank funding; asset/liability management activities; the activities of the Flinks subsidiary, a fintech company specialized in financial data aggregation and distribution; certain specified items; and the unallocated portion of corporate units.

 

The segment disclosures are prepared in accordance with the accounting policies described in Note 1 to these Consolidated Financial Statements, except for the net interest income, non-interest income, and income taxes (recovery) of the operating segments, which are presented on a taxable equivalent basis. Taxable equivalent basis is a calculation method that consists of grossing up certain revenues taxed at lower rates (notably dividends), by the income tax to a level that would make it comparable to revenues from taxable sources in Canada. An equivalent amount is added to income taxes (recovery). The effect of these adjustments is reversed under the Other heading. However, considering the enacted legislation with respect to Canadian dividends, the Bank did not recognize any income tax deductions, nor did it use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see Note 26). Operations support charges are allocated to each operating segment presented in the business segment results. The Bank assesses performance based on the net income attributable to the Bank's shareholders and holders of other equity instruments. Intersegment revenues are recognized at the exchange amount.

 

Note 32 - Segment Disclosures (cont.)

 

Results by Business Segment

 

Year ended October 31(1)
			Personal and Commercial				Wealth Management				Financial Markets				USSF&I				Other				Total
			2024		2023		2024		2023		2024		2023		2024		2023		2024		2023		2024		2023
Net interest income(2)(3)			3,587		3,321		833		778		(2,449)		(1,054)		1,303		1,132		(335)		(591)		2,939		3,586
Non-interest income(2)(4)(5)			1,086		1,083		1,953		1,743		5,479		3,710		112		77		(169)		(141)		8,461		6,472
Total revenues			4,673		4,404		2,786		2,521		3,030		2,656		1,415		1,209		(504)		(732)		11,400		10,058
Non-interest expenses(6)(7)(8)(9)(10)			2,486		2,462		1,633		1,534		1,246		1,161		439		402		250		194		6,054		5,753
Income before provisions for
	credit losses and income taxes		2,187		1,942		1,153		987		1,784		1,495		976		807		(754)		(926)		5,346		4,305
Provisions for credit losses			335		238		(1)		2		54		39		182		113		(1)		5		569		397
Income before income taxes
	(recovery)		1,852		1,704		1,154		985		1,730		1,456		794		694		(753)		(931)		4,777		3,908
Income taxes (recovery)(2)(11)			509		468		317		271		476		401		166		146		(507)		(667)		961		619
Net income			1,343		1,236		837		714		1,254		1,055		628		548		(246)		(264)		3,816		3,289
Non-controlling interests			−		−		−		−		−		−		−		−		(1)		(2)		(1)		(2)
Net income attributable to the
	Bank's shareholders and holders of other equity instruments		1,343		1,236		837		714		1,254		1,055		628		548		(245)		(262)		3,817		3,291
Average assets(12)			158,917		148,511		9,249		8,560		195,881		180,837		27,669		23,007		65,546		69,731		457,262		430,646
Total assets			165,204		154,627		10,411		8,666		193,012		178,784		30,202		25,308		63,397		56,092		462,226		423,477

 

(1)       For the year ended October 31, 2023, certain comparative figures have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these Consolidated Financial Statements.

(2)       For the year ended October 31, 2024, Net interest income was grossed up by $79 million ($332 million in 2023), Non-interest income was grossed up by $306 million ($247 million in 2023), and an equivalent amount was recognized in Income taxes (recovery). The effects of these adjustments have been reversed under the Other heading. Considering the enacted legislation with respect to Canadian dividends, the Bank did not recognize any income tax deductions, nor did it use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see Note 26).

(3)       During the year ended October 31, 2024, the Bank recorded an amount of $14 million ($10 million net of income taxes) in the Other heading to reflect the amortization of the issuance costs of the subscription receipts issued as part of the agreement to acquire CWB (for additional information, see Notes 14 and 16).

(4)       During the year ended October 31, 2024, the Bank recorded a gain of $174 million ($125 million net of income taxes) upon the remeasurement at fair value of the interest already held in CWB. Also during the year ended October 31, 2024, the Bank recorded a mark-to-market loss of $3 million ($2 million net of income taxes) on interest rate swaps used to manage the fair value changes of CWB's assets and liabilities that give rise to volatility of goodwill and capital at the closing of the transaction.

(5)       During the year ended October 31, 2023, the Bank had concluded that it had lost significant influence over TMX Group Limited (TMX) and therefore ceased using the equity method to account for this investment. The Bank had designated its investment in TMX as a financial asset measured at fair value through other comprehensive income in an amount of $191 million. Upon fair value measurement, a gain of $91 million ($67 million net of income taxes) was recorded. All these items were recorded under the Other heading.

(6)       During the year ended October 31, 2024, the Bank recorded, in the Other heading, acquisition and integration charges of $18 million ($13 million net of income taxes) related to the CWB transaction.

(7)       During the year ended October 31, 2023, the Bank had recorded intangible asset impairment losses on technology development of $75 million in Non-interest expenses, in the following segments: Personal and Commercial ($59 million), Wealth Management ($8 million), Financial Markets ($7 million), and in the Other heading ($1 million). Moreover, it recorded premises and equipment impairment losses related to right-of-use assets of $11 million in Non-interest expenses, in the Other heading.

(8)       During the year ended October 31, 2023, the Bank had recorded litigation expenses of $35 million to resolve litigations and other disputes arising from various ongoing or potential claims against the Bank in Non-interest expenses in the Wealth Management segment.

(9)       For the year ended October 31, 2023, Non-interest expenses in the Other heading included an expense of $25 million related to the retroactive impact of the changes to the Excise Tax Act, indicating that payment card clearing services rendered by a payment card network operator are subject to the goods and services tax (GST) and the harmonized sales tax (HST).

(10)    During the year ended October 31, 2023, the Bank had recorded Non-interest expenses of $15 million for (i) contract termination penalties (Personal and Commercial segment: $9 million) and for (ii) provisions for onerous contracts (Other heading: $6 million).

(11)    During the year ended October 31, 2023, the Bank had recorded a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as an $8 million tax recovery related to a 1.5% increase in the statutory tax rate, which included the impact related to current and deferred taxes for fiscal 2022. These items were recorded under the Other heading. For additional information on these tax measures, see Note 26.

(12)    Represents an average of the daily balances for the period, which is also the basis on which segment assets are reported in the business segments.

 

 

 

 

 

 

 

 

 

 

 

 

 

Results by Geographic Segment

 

Year ended October 31(1)
		Canada				United States				Other				Total
		2024		2023		2024		2023		2024		2023		2024		2023
Net interest income(2)		1,225		1,901		1,062		1,051		652		634		2,939		3,586
Non-interest income(3)(4)		7,055		5,700		191		98		1,215		674		8,461		6,472
Total revenues		8,280		7,601		1,253		1,149		1,867		1,308		11,400		10,058
Non-interest expenses(5)(6)(7)(8)(9)		5,464		5,213		238		226		352		314		6,054		5,753
Income before provisions for credit losses and income taxes		2,816		2,388		1,015		923		1,515		994		5,346		4,305
Provisions for credit losses		388		284		113		81		68		32		569		397
Income before income taxes		2,428		2,104		902		842		1,447		962		4,777		3,908
Income taxes(10)		629		353		99		68		233		198		961		619
Net income		1,799		1,751		803		774		1,214		764		3,816		3,289
Non-controlling interests		(1)		(2)		−		−		−		−		(1)		(2)
Net income attributable to the Bank's shareholders and   holders of other equity instruments		1,800		1,753		803		774		1,214		764		3,817		3,291
Average assets(11)		378,632		355,337		28,284		29,116		50,346		46,193		457,262		430,646
Total assets		381,098		347,972		26,327		29,968		54,801		45,537		462,226		423,477

 

(1)       For the year ended October 31, 2023, certain comparative figures have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these Consolidated Financial Statements.

(2)       During the year ended October 31, 2024, the Bank recorded an amount of $14 million ($10 million net of income taxes) in Net interest income in the Canada heading to reflect the amortization of the issuance costs of the subscription receipts issued as part of the agreement to acquire CWB (for additional information, see Notes 14 and 16).

(3)       During the year ended October 31, 2024, the Bank recorded a gain of $174 million ($125 million net of income taxes) upon the remeasurement at fair value of the interest already held in CWB. Also during the year ended October 31, 2024, the Bank recorded a mark-to-market loss of $3 million ($2 million net of income taxes) on interest rate swaps used to manage the fair value changes of CWB's assets and liabilities that give rise to volatility of goodwill and capital at the closing of the transaction. These items were recorded in Canada.

(4)       During the year ended October 31, 2023, the Bank had concluded that it had lost significant influence over TMX Group Limited (TMX) and therefore ceased using the equity method to account for this investment. The Bank had designated its investment in TMX as a financial asset measured at fair value through other comprehensive income in an amount of $191 million. Upon fair value measurement, a $91 million gain ($67 million net of income taxes) was recorded in Non-interest income, in Canada.

(5)       During the year ended October 31, 2024, the Bank recorded, in Non-interest expenses in Canada, acquisition and integration charges of $18 million ($13 million net of income taxes) related to the CWB transaction.

(6)       During the year ended October 31, 2023, the Bank had recorded intangible asset impairment losses on technology development of $75 million, and it recorded premises and equipment impairment losses related to right-of-use assets $11 million in Non-interest expenses, in Canada.

(7)       During the year ended October 31, 2023, the Bank had recorded litigation expenses of $35 million to resolve litigations and other disputes arising from various ongoing or potential claims against the Bank in Non-interest expenses, in Canada.

(8)       For the year ended October 31, 2023, Non-interest expenses in Canada had included an expense of $25 million related to the retroactive impact of the changes to the Excise Tax Act, indicating that payment card clearing services rendered by a payment card network operator are subject to the goods and services tax (GST) and the harmonized sales tax (HST).

(9)       During the year ended October 31, 2023, the Bank had recorded, under Non-interest expenses in Canada, expenses of $15 million for (i) contract termination penalties and for (ii) provisions for onerous contracts.

(10)    During the year ended October 31, 2023, the Bank had recorded a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as an $8 million tax recovery related to a 1.5% increase in the statutory tax rate, which includes the impact related to current and deferred taxes for fiscal 2022. These items were recorded in Canada. For additional information on these tax measures, see Note 26.

(11)    Represents an average of the daily balances for the period.

 

 

 

Note 33 - Acquisition

 

On June 11, 2024, the Bank entered into an agreement to acquire all of the issued and outstanding common shares of Canadian Western Bank (CWB) by way of a share exchange valuing CWB at approximately $5.0 billion. Each CWB common share, other than those held by the Bank, will be exchanged for 0.450 of a common share of National Bank. CWB is a diversified financial services institution based in Edmonton, Alberta. This transaction will enable the Bank to accelerate its growth across Canada. The business combination brings together two complementary Canadian banks with growing businesses, thereby enhancing customer service by offering a full range of products and services nationwide, with a regionally focused service model.

 

The transaction is subject to the satisfaction of customary closing conditions, including regulatory approvals, and is expected to close in 2025. The results of the acquired business will be consolidated from the date of closing.