National Bank reports its 2023 fourth-quarter and annual results and raises its quarterly dividend by 4 cents to $1.06 per share

The financial information reported in this document is based on the unaudited interim condensed consolidated financial statements for the fourth quarter of fiscal 2023 and on the audited annual consolidated financial statements for the year ended October 31, 2023 and is prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise indicated. IFRS represent Canadian generally accepted accounting principles (GAAP). All amounts are presented in Canadian dollars.

MONTREAL, Dec. 1, 2023 /CNW/ - For the fourth quarter of 2023, National Bank is reporting net income of $768 million, up 4% from $738 million in the fourth quarter of 2022. Fourth-quarter diluted earnings per share stood at $2.14 compared to $2.08 in the fourth quarter of 2022. These fourth-quarter increases were driven by year-over-year growth in total revenues in all the business segments, partly offset by higher non-interest expenses and higher provisions for credit losses. As for fourth-quarter adjusted net income(1), which excludes specified items, it totalled $867 million, rising 17% year over year from $738 million, while fourth-quarter adjusted diluted earnings per share(1) stood at $2.44 versus $2.08 in the fourth quarter of 2022.

National Bank of Canada Logo (CNW Group/National Bank of Canada)
National Bank of Canada Logo (CNW Group/National Bank of Canada)

For the year ended October 31, 2023, the Bank's net income totalled $3,335 million, down 1% from $3,383 million in fiscal 2022, and its diluted earnings per share stood at $9.38 in fiscal 2023 versus $9.61 in fiscal 2022. Revenue growth in all of the business segments was more than offset by higher non-interest expenses (partly due to the specified items(1) recorded during fiscal 2023) and by notably higher provisions for credit losses. The fiscal 2023 income before provisions for credit losses and income taxes was down 1% compared to fiscal 2022. As for adjusted net income(1) in fiscal 2023, it totalled $3,409 million, up 1% from $3,383 million in fiscal 2022, while adjusted diluted earnings per share(1) stood at $9.60 versus $9.61 in fiscal 2022. The fiscal 2023 specified items(1) had a $74 million unfavourable impact on net income in fiscal 2023. As for adjusted income before provisions for credit losses and income taxes(1), it rose 7% year over year.

"Through strong execution, organic growth, and tight expense management, we delivered solid financial results, generated an excellent return on equity, and maintained robust capital levels in 2023," said Laurent Ferreira, President and Chief Executive Officer of National Bank of Canada. He added, "As we enter 2024, we remain committed to our prudent and disciplined approach to capital, credit and cost management. Our defensive posture, coupled with the earnings power of our diversified business mix, positions us well to create sustainable long-term value for our stakeholders in an environment where the outlook for economic growth remains challenging."

Highlights 

(millions of Canadian dollars)



Quarter ended October 31



Year ended October 31






2023




2022



% Change



2023




2022



% Change


Net income



768




738



4



3,335




3,383



(1)


Diluted earnings per share (dollars)


$

2.14



$

2.08



3


$

9.38



$

9.61



(2)


Return on common shareholders' equity(2)



14.4

%



15.3

%





16.5

%



18.8

%




Dividend payout ratio(2)



42.0

%



36.8

%





42.0

%



36.8

%




Operating results  Adjusted(1)






















Net income – Adjusted



867




738



17



3,409




3,383



1


Diluted earnings per share – Adjusted (dollars)


$

2.44



$

2.08



17


$

9.60



$

9.61




Return on common shareholders' equity – Adjusted(3)



16.3

%



15.3

%





16.8

%



18.8

%




Dividend payout ratio – Adjusted(3)



41.1

%



36.8

%





41.1

%



36.8

%








































As at

October 31,

 2023



As at

October 31,
2022





CET1 capital ratio under Basel III(4)













13.5

%



12.7

%




Leverage ratio under Basel III(4)













4.4

%



4.5

%




(1)

See the Financial Reporting Method section on pages 2 to 5 for additional information on non-GAAP financial measures.

(2)

For additional information on the composition of these measures, see the Glossary section on pages 124 to 127 of the Bank's 2023 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.

(3)

For additional information on non-GAAP ratios, see the Financial Reporting Method section on pages 14 to 19 of the Bank's 2023 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.

(4)

For additional information on capital management measures, see the Financial Reporting Method section on pages 14 to 19 of the Bank's 2023 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.

Financial Reporting Method

The Bank's consolidated financial statements are prepared in accordance with IFRS, as issued by the IASB. The financial statements also comply with section 308(4) of the Bank Act (Canada), which states that, except as otherwise specified by the Office of the Superintendent of Financial Institutions (Canada) (OSFI), the consolidated financial statements are to be prepared in accordance with IFRS, which represent Canadian GAAP. None of the OSFI accounting requirements are exceptions to IFRS.

The presentation of segment disclosures is consistent with the presentation adopted by the Bank for the fiscal year beginning November 1, 2022. This presentation reflects a revision to the method used for the sectoral allocation of technology investment expenses, which are now immediately allocated to the various business segments, whereas certain expenses, notably costs incurred during the research phase of projects, had previously been recorded in the Other heading of segment results. This revision is consistent with the accounting policy change related to cloud computing arrangements applied in fiscal 2022. For the quarter and fiscal 2022, certain amounts in the Results by Segment section were adjusted to reflect this revision.

Non-GAAP and Other Financial Measures

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

  • non-GAAP financial measures;

  • non-GAAP ratios;

  • supplementary financial measures;

  • capital management measures.

Non-GAAP Financial Measures

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

A quantitative reconciliation of non-GAAP financial measures is presented in the Reconciliation of Non-GAAP Financial Measures tables on pages 3 to 5. Note that, for the quarter ended October 31, 2023, the following items were excluded from results: $86 million in impairment losses ($62 million net of income taxes) on intangible assets and premises and equipment, $35 million in litigation expenses ($26 million net of income taxes), and $15 million in provisions for contracts ($11 million net of income taxes). Also, for the year ended October 31, 2023, the following items were excluded from results: a gain of $91 million on the fair value remeasurement of an equity interest ($67 million net of income taxes), an expense of $25 million ($18 million net of income taxes) related to the retroactive impact of changes to the Excise Tax Act, and a $24 million income tax expense related to the Canadian government's 2022 tax measures. No specified items had been excluded from results for the quarter and year ended October 31, 2022.

For additional information on non-GAAP financial measures, non-GAAP ratios, supplementary financial measures, and capital management measures, see the Financial Reporting Method section and the Glossary section, on pages 14 to 19 and 124 to 127, respectively, of the Bank's 2023 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.

Reconciliation of Non-GAAP Financial Measures

Presentation of Results – Adjusted

(millions of Canadian dollars)









Quarter ended October 31













2023


2022




Personal and
Commercial


Wealth
Management


Financial
Markets


USSF&I


Other













Total


Total


Net interest income

857


188


(527)


291


(74)


735


1,207


Taxable equivalent



87



3


90


65


Net interest income – Adjusted

857


188


(440)


291


(71)


825


1,272


Non-interest income

295


450


1,100


22


(8)


1,859


1,127


Taxable equivalent



75




75


30


Non-interest income – Adjusted

295


450


1,175


22


(8)


1,934


1,157


Total revenues – Adjusted

1,152


638


735


313


(79)


2,759


2,429


Non-interest expenses

690


423


319


106


69


1,607


1,346


Impairment losses on intangible assets and premises and equipment(1)

(59)


(8)


(7)



(12)


(86)



Litigation expenses(2)


(35)





(35)



Provisions for contracts(3)

(9)





(6)


(15)



Non-interest expenses – Adjusted

622


380


312


106


51


1,471


1,346


Income before provisions for credit losses and income taxes – Adjusted

530


258


423


207


(130)


1,288


1,083


Provisions for credit losses

65


1


24


23


2


115


87


Income before income taxes – Adjusted

465


257


399


184


(132)


1,173


996


Income taxes

109


59


(54)


39


(49)


104


163


Taxable equivalent



162



3


165


95


Income taxes on impairment losses on intangible assets and premises
















and equipment(1)

17


2


2



3


24



Income taxes on litigation expenses(2)


9





9



Income taxes on provisions for contracts(3)

2





2


4



Income taxes – Adjusted

128


70


110


39


(41)


306


258


Net income – Adjusted

337


187


289


145


(91)


867


738


Specified items after income taxes

(49)


(32)


(5)



(13)


(99)



Net income   

288


155


284


145


(104)


768


738


Non-controlling interests
























Net income attributable to the Bank's shareholders

  and holders of other equity instruments

288


155


284


145


(104)


768


738


Net income attributable to the Bank's shareholders

  and holders of other equity instruments – Adjusted

337


187


289


145


(91)


867


738


Dividends on preferred shares and distributions on

  limited recourse capital notes











35


30


Net income attributable to common shareholders – Adjusted











832


708


(1)

For the quarter ended October 31, 2023, the Bank recorded $75 million in intangible asset impairment losses ($54 million net of income taxes) on technology development for which the Bank has decided to cease its use or development, and it recorded $11 million in impairment losses on premises and equipment ($8 million net of income taxes) related to right-of-use assets.

(2)

For the quarter ended October 31, 2023, the Bank recorded $35 million in litigation expenses ($26 million net of income taxes) to resolve litigations and other disputes arising from various ongoing or potential claims against the Bank.

(3)

For the quarter ended October 31, 2023, the Bank recorded $15 million in charges ($11 million net of income taxes) for contract termination penalties and for provisions for onerous contracts. 

(millions of Canadian dollars)







Year ended October 31













2023


2022




Personal and Commercial


Wealth Management


Financial Markets


USSF&I


Other













Total


Total


Net interest income

3,321


778


(1,378)


1,132


(267)


3,586


5,271


Taxable equivalent



324



8


332


234


Net interest income  Adjusted

3,321


778


(1,054)


1,132


(259)


3,918


5,505


Non-interest income

1,195


1,743


3,463


77


106


6,584


4,381


Taxable equivalent



247




247


48


Gain on the fair value remeasurement of an equity interest(1)





(91)


(91)...



Non-interest income – Adjusted

1,195


1,743


3,710


77


15


6,740


4,429


Total revenues – Adjusted

4,516


2,521


2,656


1,209


(244)


10,658


9,934


Non-interest expenses

2,510


1,534


1,161


402


194


5,801


5,230


Impairment losses on intangible assets and premises and equipment(2)

(59)


(8)


(7)



(12)


(86)



Litigation expenses(3)


(35)





(35)



Expense related to changes to the Excise Tax Act(4)





(25)


(25)



Provisions for contracts(5)

(9)





(6)


(15)



Non-interest expenses  Adjusted

2,442


1,491


1,154


402


151


5,640


5,230


Income before provisions for credit losses and income taxes –
Adjusted

2,074


1,030


1,502


807


(395)


5,018


4,704


Provisions for credit losses

238


2


39


113


5


397


145


Income before income taxes – Adjusted

1,836


1,028


1,463


694


(400)


4,621


4,559


Income taxes

486


271


(170)


146


(96)


637


894


Taxable equivalent



571



8


579


282


Income taxes on the gain on the fair value remeasurement

  of an equity interest(1)





(24)


(24)



Income taxes on impairment losses on intangible assets and premises
  and equipment(2)

17


2


2



3


24



Income taxes on litigation expenses(3)


9





9



Income taxes on the expense related to changes to the Excise Tax Act(4)





7


7



Income taxes on provisions for contracts(5)

2





2


4



Income taxes related to the Canadian government's 2022

  tax measures(6)





(24)


(24)



Income taxes – Adjusted

505


282


403


146


(124)


1,212


1,176


Net income  Adjusted

1,331


746


1,060


548


(276)


3,409


3,383


Specified items after income taxes

(49)


(32)


(5)



12


(74)



Net income

1,282


714


1,055


548


(264)


3,335


3,383


Non-controlling interests





(2)


(2)


(1)


Net income attributable to the Bank's shareholders

  and holders of other equity instruments

1,282


714


1,055


548


(262)


3,337


3,384


Net income attributable to the Bank's shareholders

  and holders of other equity instruments – Adjusted

1,331


746


1,060


548


(274)


3,411


3,384


Dividends on preferred shares and distributions

  on limited recourse capital notes











141


107


Net income attributable to common shareholders – Adjusted











3,270


3,277


(1)

During the year ended October 31, 2023, the Bank 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 designated its investment in TMX as a financial asset measured at fair value through other comprehensive income in an amount of $191 million. Upon the fair value measurement, a gain of $91 million ($67 million net of income taxes) was recorded.

(2)

During the year ended October 31, 2023, the Bank recorded $75 million in intangible asset impairment losses ($54 million net of income taxes) on technology development for which the Bank has decided to cease its use or development, and it recorded $11 million in premises and equipment impairment losses ($8 million net of income taxes) related to right-of-use assets.

(3)

During the year ended October 31, 2023, the Bank recorded $35 million in litigation expenses ($26 million net of income taxes) to resolve litigations and other disputes arising from ongoing or potential claims against the Bank.

(4)

During the year ended October 31, 2023, the Bank recorded a $25 million expense ($18 million net of income taxes) related to the retroactive impact of changes to the Excise Tax Act, indicating that payment card clearing services rendered by a payment card network operator are subject to the goods and services tax (GST) and the harmonized sales tax (HST). 

(5)

During the year ended October 31, 2023, the Bank recorded $15 million in charges ($11 million net of income taxes) for contract termination penalties and for provisions for onerous contracts.

(6)

During the year ended October 31, 2023, the Bank 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 includes the impact related to current and deferred taxes for fiscal 2022. For additional information on these tax measures, see the Income Taxes section on page 18. 

Presentation of Basic and Diluted Earnings Per Share – Adjusted

(Canadian dollars)


Quarter ended October 31



Year ended October 31





2023



2022



2023



2022


Basic earnings per share


$

2.16


$

2.10


$

9.47


$

9.72


Gain on the fair value remeasurement of an equity interest(1)







(0.20)




Impairment losses on intangible assets and premises and equipment(2)



0.19





0.19




Litigation expenses(3)



0.08





0.08




Expense related to changes to the Excise Tax Act(4)







0.05




Provisions for contracts(5)



0.03





0.03




Income taxes related to the Canadian government's 2022 tax measures(6)







0.07




Basic earnings per share – Adjusted


$

2.46


$

2.10


$

9.69


$

9.72


Diluted earnings per share


$

2.14


$

2.08


$

9.38


$

9.61


Gain on the fair value remeasurement of an equity interest(1)







(0.20)




Impairment losses on intangible assets and premises and equipment(2)



0.19





0.19




Litigation expenses(3)



0.08





0.08




Expense related to changes to the Excise Tax Act(4)







0.05




Provisions for contracts(5)



0.03





0.03




Income taxes related to the Canadian government's 2022 tax measures(6)







0.07




Diluted earnings per share – Adjusted


$

2.44


$

2.08


$

9.60


$

9.61


(1)

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

(2)

During the quarter and year ended October 31, 2023, the Bank recorded $75 million in intangible asset impairment losses ($54 million net of income taxes) on technology development for which the Bank has decided to cease its use or development, and it recorded $11 million in premises and equipment impairment losses ($8 million net of income taxes) related to right-of-use assets.

(3)

During the quarter and year ended October 31, 2023, the Bank recorded $35 million in litigation expenses ($26 million net of income taxes) to resolve litigations and other disputes arising from ongoing or potential claims against the Bank.

(4)

During the year ended October 31, 2023, the Bank recorded a $25 million expense ($18 million net of income taxes) related to the retroactive impact of changes to the Excise Tax Act, indicating that payment card clearing services rendered by a payment card network operator are subject to the goods and services tax (GST) and the harmonized sales tax (HST). 

(5)

During the quarter and year ended October 31, 2023, the Bank recorded $15 million in charges ($11 million net of income taxes) for contract termination penalties and for provisions for onerous contracts.

(6)

During the year ended October 31, 2023, the Bank 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 includes the impact related to current and deferred taxes for fiscal 2022. For additional information on these tax measures, see the Income Taxes section on page 18. 

Highlights

(millions of Canadian dollars, except per share amounts)


Quarter ended October 31



Year ended October 31





2023




2022



% Change



2023




2022


% Change


Operating results





















Total revenues



2,594




2,334



11



10,170




9,652


5


Income before provisions for credit losses and income taxes



987




988





4,369




4,422


(1)


Net income



768




738



4



3,335




3,383


(1)


Return on common shareholders' equity(1)



14.4

%



15.3

%





16.5

%



18.8

%



Earnings per share






















Basic


$

2.16



$

2.10



3


$

9.47



$

9.72


(3)



Diluted


$

2.14



$

2.08



3


$

9.38



$

9.61


(2)


Operating results – Adjusted(2)





















Total revenues – Adjusted(2)



2,759




2,429



14



10,658




9,934


7


Income before provisions for credit losses

  and income taxes – Adjusted(2)



1,288




1,083



19



5,018




4,704


7


Net income – Adjusted(2)



867




738



17



3,409




3,383


1


Return on common shareholders' equity – Adjusted(3)



16.3

%



15.3

%





16.8

%



18.8

%



Operating leverage – Adjusted(3)



4.3

%



1.0

%





(0.5)

%



2.1

%



Efficiency ratio – Adjusted(3)



53.3

%



55.4

%





52.9

%



52.6

%



Earnings per share – Adjusted(2)






















Basic


$

2.46



$

2.10



17


$

9.69



$

9.72




Diluted


$

2.44



$

2.08



17


$

9.60



$

9.61



Common share information





















Dividends declared


$

1.02



$

0.92



11


$

3.98



$

3.58


11


Book value(1)


$

60.68



$

55.24





$

60.68



$

55.24




Share price






















High


$

103.58



$

94.37





$

103.58



$

105.44





Low


$

84.97



$

83.12





$

84.97



$

83.12





Close


$

86.22



$

92.76





$

86.22



$

92.76




Number of common shares (thousands)



338,285




336,582






338,285




336,582




Market capitalization



29,167




31,221






29,167




31,221


























(millions of Canadian dollars)


As at

October 31,

2023



As at

 October 31,

2022


% Change


Balance sheet and off-balance-sheet









Total assets


423,578



403,740


5


Loans and acceptances, net of allowances


225,443



206,744


9


Deposits


288,173



266,394


8


Equity attributable to common shareholders


20,526



18,594


10


Assets under administration(1)


652,631



616,165


6


Assets under management(1)


120,858



112,346


8












Regulatory ratios under Basel III(4)









Capital ratios










Common Equity Tier 1 (CET1)


13.5

%


12.7

%




Tier 1


16.0

%


15.4

%




Total


16.8

%


16.9

%



Leverage ratio


4.4

%


4.5

%



TLAC ratio(4)


29.2

%


27.7

%



TLAC leverage ratio(4)


8.0

%


8.1

%



Liquidity coverage ratio (LCR)(4)


155

%


140

%



Net stable funding ratio (NSFR)(4)


118

%


117

%



Other information









Number of employees – Worldwide (full-time equivalent)


28,916



27,103


7


Number of branches in Canada 


368



378


(3)


Number of banking machines in Canada


944



939


1





























(1)

For additional information on composition of these measures, see the Glossary section on pages 124 to 127 of the Bank's 2023 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.

(2)

See the Financial Reporting Method section on pages 2 to 5 for additional information on non-GAAP financial measures. 

(3)

For additional information on non-GAAP ratios, see the Financial Reporting Method section on pages 14 to 19 of the Bank's 2023 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.

(4)

For additional information on capital management measures, see the Financial Reporting Method section on pages 14 to 19 of the Bank's 2023 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.

Financial Analysis

This press release should be read in conjunction with the 2023 Annual Report (which includes the audited annual consolidated financial statements and MD&A) available on the Bank's website at nbc.ca. Additional information about the Bank, including the Annual Information Form, can be obtained from the Bank's website at nbc.ca or SEDAR+'s website at sedarplus.ca.

Total Revenues
For the fourth quarter of 2023, the Bank's total revenues amounted to $2,594 million, up $260 million or 11% from the fourth quarter of 2022. In the Personal and Commercial segment, fourth-quarter total revenues rose 8% year over year owing to growth in loans and deposits, to a higher net interest margin resulting from interest rate hikes, and to an increase in insurance revenues, partly offset by a decrease in revenues from foreign exchange activities. In the Wealth Management segment, fourth-quarter total revenues grew 4% year over year, essentially due to higher fee-based revenues, notably from investment management and trust service fees as well as revenues from mutual funds. In the Financial Markets segment, fourth-quarter total revenues on a taxable equivalent basis increased by 31% year over year due to increases in global markets revenues and in corporate and investment banking revenues. In the USSF&I segment, fourth-quarter total revenues were up 17% year over year owing to higher revenues generated by the Credigy subsidiary as well to sustained revenue growth at the ABA Bank subsidiary as a result of business growth. For the Other heading, fourth-quarter total revenues were down year over year due to lower gains on investments, partly offset by a higher contribution from Treasury activities.

For the year ended October 31, 2023, total revenues amounted to $10,170 million, up $518 million or 5% from $9,652 million in fiscal 2022. In the Personal and Commercial segment, the fiscal 2023 total revenues rose $482 million or 12% year over year as net interest income increased owing to loan and deposit growth, a higher net interest margin arising from interest rate hikes, and increases in credit card revenues, insurance revenues, and revenues from bankers' acceptances, partly offset by a decrease in revenues from foreign exchange activities. In the Wealth Management segment, the fiscal 2023 total revenues grew 6%, mainly due to an increase in net interest income, partly offset by a decrease in transaction-based and other revenues. In the Financial Markets segment, the fiscal 2023 total revenues on a taxable equivalent basis were up $188 million or 8% year over year given growth in corporate and investment banking revenues, partly offset by a decrease in global markets revenues. In the USSF&I segment, the fiscal 2023 total revenues were up 9% year over year owing to revenue growth at ABA Bank as a result of business growth as well as to an increase in Credigy's revenues. For the Other heading, the fiscal 2023 total revenues were down year over year due to lower gains on investments in fiscal 2023, partly offset by a higher contribution from Treasury activities and a $91 million gain recorded upon the fair value remeasurement of an equity interest during fiscal 2023. As for adjusted total revenues, they amounted to $10,658 million in fiscal 2023, up 7% year over year.

Non-Interest Expenses
For the fourth quarter of 2023, non-interest expenses stood at $1,607 million, a 19% year-over-year increase that resulted from higher compensation and employee benefits, notably due to wage growth and a greater number of employees, as well as from the variable compensation associated with revenue growth. Occupancy, including amortization expense, was also up, partly due to the expanding banking network at ABA Bank as well as to $11 million in impairment losses on premises and equipment recorded in the fourth quarter of 2023. An increase in technology expenses, including amortization, came from the significant investments made to support the Bank's technological evolution and business development plan as well as from $75 million in intangible asset impairment losses. Lastly, other expenses were up due to year-over-year increases in advertising expenses, travel expenses (as activities with clients resumed) as well as to $35 million in litigation expenses and $15 million in provisions for contracts. The specified items recorded in non-interest expenses during the fourth quarter of 2023 had an unfavourable impact of $136 million. As for adjusted non-interest expenses, they stood at $1,471 million in the fourth quarter of 2023, up 9% from $1,346 million in fourth-quarter 2022.

For the year ended October 31, 2023, the Bank's non-interest expenses stood at $5,801 million, up 11% year over year. Compensation and employee benefits stood at $3,452 million in fiscal 2023, a 5% year-over-year increase that was mainly due to wage growth and a greater number of employees. Occupancy expense, including amortization expense, was also up, partly due to the expanding banking network at ABA Bank, to expenses related to the Bank's new head office building, and to $11 million in impairment losses on premises and equipment. An increase in technology expenses, including amortization, came from the significant investments made to support the Bank's technological evolution and business development plan as well as from the intangible asset impairment losses recorded in fiscal 2023. The fiscal 2023 communication expenses remained relatively stable year over year, whereas professional fees were up slightly. Other expenses were also up due to the same reasons as those provided for the quarter as well as to the $20 million reversal of the provision for the compensatory tax on salaries paid in Quebec during fiscal 2022 and a $25 million expense related to changes to the Excise Tax Act recorded in 2023. The specified items recorded in non-interest expenses during fiscal 2023 had an unfavourable impact of $161 million. As for adjusted non-interest expenses, they stood at $5,640 million in fiscal 2023, up $410 million or 8% from non-interest expenses of $5,230 million in fiscal 2022.

Provisions for Credit Losses
For the fourth quarter of 2023, the Bank recorded $115 million in provisions for credit losses compared to $87 million in the fourth quarter of 2022. An increase in provisions for credit losses on non-impaired loans of $23 million was due to the growth in the loan portfolios, the migration of credit risk, the recalibration of certain risk parameters, and the updates and revisions to the probability weightings of scenarios, reflecting the uncertainties in the macroeconomic outlook, uncertainties such as rising inflationary pressure, high interest rates, and geopolitical instability. As for fourth-quarter provisions for credit losses on impaired loans excluding purchased or originated credit-impaired (POCI) (1) loans, they rose $19 million year over year. This increase came from Personal Banking (including credit card receivables) and Commercial Banking, reflecting a normalization of credit performance, and from Credigy (excluding POCI loans). These increases were partly offset by a decrease in provisions for credit losses on impaired loans in the Financial Markets segment. Provisions for credit losses on POCI loans were down $14 million year over year due to favourable remeasurements of certain Credigy portfolios during the fourth quarter of 2023 as well as to recoveries of credit losses following repayments of POCI loans at Commercial Banking.

For fiscal 2023, the Bank recorded $397 million in provisions for credit losses compared to $145 million in fiscal 2022. This increase was mainly due to higher provisions for credit losses on non-impaired loans, recorded for the same reasons as those provided for the quarter. As for provisions for credit losses on impaired loans excluding POCI(1) loans, they were also up and came from Personal Banking (including credit card receivables) and Commercial Banking, reflecting a normalization of credit risk, and from the Credigy subsidiary. These increases were tempered by a decrease in provisions for credit losses on impaired loans at ABA Bank. Provisions for credit losses on POCI loans were down year over year due to favourable remeasurements of certain Credigy portfolios during fiscal 2023 as well as to recoveries of credit losses following repayments of POCI loans at Commercial Banking.

Income Taxes
For the fourth quarter of 2023, income taxes stood at $104 million compared to $163 million in the same quarter of 2022. The 2023 fourth-quarter effective income tax rate was 12% compared to 18% in the same quarter of 2022. The year-over-year change in effective income tax rate stems mainly from a higher level and proportion of tax-exempt dividend income and from higher income in lower tax-rate jurisdictions, factors that were partly offset by the additional 1.5% tax on banks and life insurers.

For the year ended October 31, 2023, the effective income tax rate was 16% compared to 21% in fiscal 2022. The year-over-year change in effective income tax rate stems from the same reasons as those mentioned for the quarter, partly offset by the impact of the Canadian government's 2022 tax measures recorded in the first quarter of 2023, namely, the Canada Recovery Dividend and the additional 1.5% tax on banks and life insurers.

(1)

For additional information on composition of these measures, see the Glossary section on pages 124 to 127 of the Bank's 2023 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.

Results by Segment

The Bank carries out its activities in four business segments: Personal and Commercial, Wealth Management, Financial Markets, and U.S. Specialty Finance and International, which comprises the activities of the Credigy Ltd. (Credigy) and Advanced Bank of Asia Limited (ABA Bank) subsidiaries. Other operating activities, certain specified items, Treasury activities, and the operations of the Flinks Technology Inc. (Flinks) subsidiary are grouped in the Other heading of segment results. Each reportable segment is distinguished by services offered, type of clientele, and marketing strategy.

Personal and Commercial

(millions of Canadian dollars)


 Quarter ended October 31


Year ended October 31




2023



2022(1)



% Change


2023



2022(1)



% Change


Operating results


















Net interest income


857



785



9


3,321



2,865



16


Non-interest income


295



286



3


1,195



1,169



2


Total revenues


1,152



1,071



8


4,516



4,034



12


Non-interest expenses


690



574



20


2,510



2,241



12


Income before provisions for credit losses and income taxes


462



497



(7)


2,006



1,793



12


Provisions for credit losses


65



42



55


238



97





Income before income taxes


397



455



(13)


1,768



1,696



4


Income taxes


109



120



(9)


486



449



8


Net income


288



335



(14)


1,282



1,247



3


Less: Specified items after income taxes(2)


(49)







(49)







Net income – Adjusted(2)


337



335



1


1,331



1,247



7


Net interest margin(3)


2.36

%


2.26

%




2.35

%


2.15

%




Average interest-bearing assets(3)


144,321



138,064



5


141,458



133,543



6


Average assets(4)


151,625



145,145



4


148,511



140,300



6


Average loans and acceptances(4)


150,847



144,297



5


147,716



139,538



6


Net impaired loans(3)


285



193



48


285



193



48


Net impaired loans as a % of total loans and acceptances(3)


0.2

%


0.1

%




0.2

%


0.1

%




Average deposits(4)


87,873



85,902



2


85,955



81,996



5


Efficiency ratio(3)


59.9

%


53.6

%




55.6

%


55.6

%




Efficiency ratio – Adjusted(5)


54.0

%


53.6

%




54.1

%


55.6

%




(1)

For the quarter and year ended October 31, 2022, certain amounts were reclassified, notably due to a revised method for the sectoral allocation of technology investment expenses.

(2)

See the Financial Reporting Method section on pages 2 to 5 for additional information on non-GAAP financial measures. During the fourth quarter and year ended October 31, 2023, the segment recorded, in the Non-interest expenses item, $59 million in intangible asset impairment losses ($42 million net of income taxes) on technology development as well as charges of $9 million ($7 million net of income taxes) for contract termination penalties. 

(3)

For additional information on the composition of these measures, see the Glossary section on pages 124 to 127 of the Bank's 2023 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.

(4)

Represents an average of the daily balances for the period.

(5)

For additional information on non-GAAP ratios, see the Financial Reporting Method section on pages 14 to 19 of the Bank's 2023 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.

In the Personal and Commercial segment, net income totalled $288 million in the fourth quarter of 2023 compared to $335 million in the fourth quarter of 2022, a 14% year-over-year decrease that was due to higher non-interest expenses (including the specified items recorded in the fourth quarter of 2023) and higher provisions for credit losses. As for the segment's adjusted net income in the fourth quarter of 2023, it totalled $337 million, up 1% year over year. Fourth-quarter income before provisions for credit losses and income taxes amounted to $462 million, down 7% year over year, whereas adjusted income before provisions for credit losses and income taxes rose 7%. Fourth-quarter net interest income rose 9% year over year owing to growth in personal and commercial loans and deposits as well as to a higher net interest margin, which was 2.36% in fourth-quarter 2023 compared to 2.26% in fourth-quarter 2022. This growth reflects the interest rate hikes and was mainly attributable to the deposit margin. As for fourth-quarter non-interest income, it grew $9 million or 3% year over year.

Personal Banking's fourth-quarter total revenues increased by $51 million year over year. This increase came from an increase in net interest income driven by loan and deposit growth, from an improved margin on deposits, and from higher insurance revenues (reflecting revisions to actuarial reserves). Commercial Banking's fourth-quarter total revenues grew $30 million year over year, mainly due to an increase in net interest income that was driven by loan and deposit growth and an improved deposit margin, partly offset by a decrease in revenues from foreign exchange activities.

For the fourth quarter of 2023, Personal and Commercial's non-interest expenses stood at $690 million, a 20% year-over-year increase that was mainly due to $68 million in specified items recorded during the quarter. The increase also came from higher compensation and employee benefits (resulting from wage growth), from greater investments made as part of the segment's technological evolution, and from an increase in operations support charges. At 59.9%, the efficiency ratio deteriorated, mainly due to the specified items recorded during the fourth quarter of 2023. As for the segment's adjusted non-interest expenses, they stood at $622 million in the fourth quarter of 2023, up 8% year over year. Its adjusted efficiency ratio was 54.0% compared to 53.6% in the fourth quarter of 2022. The segment recorded $65 million in provisions for credit losses in the fourth quarter of 2023 compared to $42 million in the same quarter of 2022. This increase was mainly due to higher provisions for credit losses on impaired Personal Banking loans (including credit card receivables) and impaired Commercial Banking loans, reflecting a normalization of credit performance. Fourth-quarter provisions for credit losses on non-impaired Commercial Banking loans were also up year over year. Also during the fourth quarter of 2023, the segment recorded recoveries of credit losses on Commercial Banking's POCI loans as a result of loan repayments.

For fiscal 2023, the Personal and Commercial segment's net income totalled $1,282 million compared to $1,247 million in fiscal 2022, a 3% year-over-year increase that was driven by growth of $482 million in the segment's total revenues, partly offset by higher non-interest expenses (including the fiscal 2023 specified items) and by notably higher provisions for credit losses. As for the segment's adjusted net income in fiscal 2023, it totalled $1,331 million, up 7% year over year. For fiscal 2023, the segment's income before provisions for credit losses and income taxes amounted to $2,006 million, up 12% year over year, while its adjusted income before provisions for credit losses and income taxes rose 16%. Personal Banking's fiscal 2023 total revenues were up 8% year over year, mainly due to growth in loans and deposits and to a higher deposit margin (partly offset by a lower margin on loans) as well as to increases in card revenues and insurance revenues. In addition, Commercial Banking's 2023 total revenues rose 18% owing to growth in loans and deposits, to a higher net interest margin, as well as to increases in revenues from bankers' acceptances, partly offset by a decrease in revenues from foreign exchange activities.

For fiscal 2023, the segment's non-interest expenses stood at $2,510 million, a 12% year-over-year increase that was due to the same reasons provided above for the quarter. At 55.6%, the segment's fiscal 2023 efficiency ratio remained stable compared to last year. As for the segment's adjusted non–interest expenses for fiscal 2023, they stood at $2,442 million, up 9% year over year. At 54.1%, the segment's 2023 adjusted efficiency ratio improved by 1.5 percentage points from 55.6% in 2022. The segment recorded $238 million in provisions for credit losses in fiscal 2023, which is $141 million more than the $97 million recorded in fiscal 2022. This increase was due to higher provisions for credit losses on impaired Personal Banking loans (including credit card receivables) and impaired Commercial Banking loans, reflecting a normalization of credit performance. As for the segment's provisions for credit losses on non-impaired loans, they were up due to growth in the loan portfolios, to the migration of credit risk, and to a less favourable macroeconomic outlook during fiscal 2023. Also during fiscal 2023, the segment recorded recoveries of credit losses on Commercial Banking's POCI loans as a result of loan repayments.

Wealth Management

(millions of Canadian dollars)


Quarter ended October 31


Year ended October 31




2023



2022(1)



% Change


2023



2022(1)



% Change


Operating results


















Net interest income


188



187



1


778



594



31


Fee-based revenues


371



347



7


1,432



1,429




Transaction-based and other revenues


79



79




311



352



(12)


Total revenues


638



613



4


2,521



2,375



6


Non-interest expenses 


423



349



21


1,534



1,417



8


Income before provisions for credit losses and income taxes


215



264



(19)


987



958



3


Provisions for credit losses


1



2



(50)


2



3



(33)


Income before income taxes


214



262



(18)


985



955



3


Income taxes


59



69



(14)


271



254



7


Net income


155



193



(20)


714



701



2


Less: Specified items after income taxes(2)


(32)







(32)







Net income  – Adjusted(2)


187



193



(3)


746



701



6


Average assets(3)


8,494



8,582



(1)


8,560



8,440



1


Average loans and acceptances(3)


7,523



7,513




7,582



7,343



3


Net impaired loans(4)


8



15