The financial information reported in this document is based on the unaudited interim condensed consolidated financial statements for the quarter and nine-month period ended July 31, 2024 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, Aug. 28, 2024 /CNW/ - For the third quarter of 2024, National Bank is reporting net income of $1,033 million, up 24% from $830 million in the third quarter of 2023. Third-quarter diluted earnings per share stood at $2.89 compared to $2.33 in the third quarter of 2023. These increases were driven by good performance in all of the business segments. Adjusted net income(1), which excludes specified items(1) (notably the items related to the agreement to acquire Canadian Western Bank (CWB) recorded during the third quarter of 2024), totalled $960 million compared to $781 million in the same quarter of 2023. Adjusted diluted earnings(1) per share stood at $2.68 compared to $2.18 in the third quarter of 2023.
For the first nine months of 2024, the Bank's net income totalled $2,861 million, up 13% from $2,538 million in the same period of 2023. Nine-month diluted earnings per share stood at $8.03 versus $7.14 in the same period last year. These increases were driven by good performance, owing to revenue growth, in all of the business segments, partly offset by increases in non-interest expenses, provisions for credit losses, and income taxes. Nine-month adjusted net income(1), which excludes specified items(1), totalled $2,788 million, up 11% from $2,513 million in the same period of 2023, and nine-month adjusted diluted earnings per share(1) stood at $7.82, up 11% from $7.06 in the same period of 2023.
"Our strong financial results for the third quarter reflect our diversified earnings mix and solid credit profile as well as disciplined execution across the Bank," said Laurent Ferreira, President and Chief Executive Officer of National Bank of Canada. "With our prudent approach to capital, credit, and costs, we remain well-positioned in a complex macro environment and we look forward to the growth opportunities ahead."
Highlights
(millions of Canadian dollars)
Quarter ended July 31
Nine months ended July 31
2024
2023(2)
% Change
2024
2023(2)
% Change
Net income
1,033
830
24
2,861
2,538
13
Diluted earnings per share (dollars)
$
2.89
$
2.33
24
$
8.03
$
7.14
12
Income before provisions for credit losses and income taxes
1,455
1,086
34
3,994
3,342
20
Return on common shareholders' equity(3)
18.4
%
16.1
%
17.5
%
17.0
%
Dividend payout ratio(3)
41.6
%
41.7
%
41.6
%
41.7
%
Operating results – Adjusted(1)
Net income – Adjusted
960
781
23
2,788
2,513
11
Diluted earnings per share – Adjusted (dollars)
$
2.68
$
2.18
23
$
7.82
$
7.06
11
Income before provisions for credit losses and income taxes – Adjusted
1,448
1,172
24
4,184
3,690
13
As at
July 31,
2024
As at
October 31, 2023
CET1 capital ratio under Basel III(4)
13.5
%
13.5
%
Leverage ratio under Basel III(4)
4.4
%
4.4
%
(1)
See the Financial Reporting Method section on pages 3 to 6 for additional information on non-GAAP financial measures.
(2)
Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the unaudited interim condensed consolidated financial statements in the Report to Shareholders – Third Quarter 2024, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.
(3)
For details on the composition of these measures, see the Glossary section on pages 49 to 52 in the Report to Shareholders – Third Quarter 2024, 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 4 to 10 in the Report to Shareholders – Third Quarter 2024, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.
Personal and Commercial
Net income totalled $366 million in the third quarter of 2024 versus $319 million in the third quarter of 2023, a 15% increase that was driven by growth in total revenues.
At $1,198 million, third-quarter total revenues rose $83 million or 7% year over year, mainly due to an increase in net interest income (driven by growth in loan and deposit volumes), partly offset by a lower net interest margin.
Compared to a year ago, personal lending grew 4% and commercial lending grew 14%.
The net interest margin(1) stood at 2.31% in the third quarter of 2024, down from 2.34% in the third quarter of 2023.
Third-quarter non-interest expenses stood at $615 million, up 3% year over year.
Provisions for credit losses rose $4 million year over year.
At 51.3%, the third-quarter efficiency ratio(1) improved from 53.8% in the third quarter of 2023.
Wealth Management
Net income totalled $217 million in the third quarter of 2024, a 19% increase from $183 million in the third quarter of 2023.
Third-quarter total revenues amounted to $716 million compared to $629 million in third-quarter 2023, an $87 million or 14% increase driven by growth in fee-based revenues and net interest income.
Third-quarter non-interest expenses stood at $416 million versus $375 million in third-quarter 2023, an 11% increase associated with revenue growth.
At 58.1%, the third-quarter efficiency ratio(1) improved from 59.6% in the third quarter of 2023.
Financial Markets
Net income totalled $318 million in the third quarter of 2024, up 55% from $205 million in the third quarter of 2023.
Third-quarter total revenues on a taxable equivalent basis amounted to $781 million, a 39% increase that was due to growth in global markets revenues and in corporate and investment banking revenues.
Third-quarter non-interest expenses stood at $320 million compared to $272 million in third-quarter 2023, an increase that was partly due to variable compensation and to the segment's technological investments.
Third-quarter provisions for credit losses stood at $22 million compared to $5 million in the third quarter of 2023.
At 41.0%, the efficiency ratio(1) on a taxable equivalent basis improved from 48.6% in the third quarter of 2023.
U.S. Specialty Finance and International
Net income totalled $158 million in the third quarter of 2024, up 23% from $128 million in the third quarter of 2023.
Third-quarter total revenues amounted to $361 million, a 24% year-over-year increase driven by revenue growth at both the Credigy and ABA Bank subsidiaries.
Third-quarter non-interest expenses stood at $115 million, a 15% year-over-year increase attributable to business growth at Credigy and ABA Bank.
Third-quarter provisions for credit losses were up $17 million year over year, with the increase being attributable to both Credigy and ABA Bank.
At 31.9%, the efficiency ratio(1) improved from 34.2% in the third quarter of 2023.
Other
There was a net loss of $26 million in the third quarter of 2024 compared to a net loss of $5 million in the same quarter of 2023, a change that essentially came from a year-over-year increase in non-interest expenses (notably higher variable compensation associated with the Bank's revenue growth), partly offset by a more favourable impact of specified items(2) on net loss in the third quarter of 2024.
CWB Transaction
On June 11, 2024, the Bank entered into an agreement to acquire all of the issued and outstanding common shares of CWB by way of a share exchange valuing CWB at approximately $5.0 billion. This transaction will enable the Bank to accelerate its growth across Canada. The transaction is subject to the satisfaction of customary closing conditions, including regulatory approvals, and is expected to close in 2025. For additional information, see the CWB Transaction section of in the Report to Shareholders – Third Quarter 2024, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca.
Capital Management
As at July 31, 2024, the Common Equity Tier 1 (CET1) capital ratio under Basel III(3) stood at 13.5%, unchanged from October 31, 2023.
As at July 31, 2024, the Basel III(3) leverage ratio was 4.4%, unchanged from October 31, 2023.
Dividends
On August 27, 2024, the Board of Directors declared regular dividends on the various series of first preferred shares and a dividend of $1.10 per common share, payable on November 1, 2024 to shareholders of record on September 30, 2024.
(1)
For details on the composition of these measures, see the Glossary section on pages 49 to 52 in the Report to Shareholders – Third Quarter 2024, 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 3 to 6 for additional information on non-GAAP financial measures.
(3)
For additional information on capital management measures, see the Financial Reporting Method section on pages 4 to 10 in the Report to Shareholders – Third Quarter 2024, 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, 2023. This presentation reflects the retrospective application of accounting policy changes arising from the adoption of IFRS 17– Insurance Contracts (IFRS 17). For additional information, see Note 2 to the unaudited interim condensed consolidated financial statements in the Report to Shareholders – Third Quarter 2024, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca. The figures for the 2023 quarters have been adjusted to reflect these accounting policy changes.
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 MeasuresThe 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, 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, regardless of their tax treatment. However, in light of the enacted legislation with respect to Canadian dividends, the Bank did not recognize an income tax deduction, nor did it or use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information see the Income Taxes section in the Report to shareholders for the third quarter of 2024, which is available on the Bank's website at nbc.ca or the SEDAR+ website at sedarplus.ca).
The key non-GAAP financial measures used by the Bank to analyze its results are described below, and a quantitative reconciliation of these measures is presented in the tables in the Reconciliation of Non-GAAP Financial Measures section on pages 4 to 6. Note that, for the quarter and nine-month period ended July 31, 2024, after the agreement to acquire Canadian Western Bank (CWB) was concluded, several acquisition-related items have been excluded from results (in particular, the amortization of the subscription receipt issuance costs of $5 million ($3 million net of income taxes); a gain of $120 million ($86 million net of income taxes) resulting from the remeasurement at fair value of the CWB common shares already held by the Bank; the impact of managing fair value changes, representing a loss of $7 million ($5 million net of income taxes); and $7 million in acquisition and integration charges ($5 million net of income taxes)). For the quarter and nine-month period ended July 31, 2023, a gain of $91 million ($67 million net of income taxes) recorded upon the fair value remeasurement of an equity interest and an expense related to the retroactive impact of changes to the Excise Tax Act of $25 million ($18 million net of income taxes) had been excluded from results. In addition, for the nine-month period ended July 31, 2023, a $24 million tax expense related to the Canadian government's 2022 tax measures had been excluded from results given the one-time nature of the item. This amount had included 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.
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 4 to 10 and 49 to 52, respectively, in the Report to shareholders for the third quarter of 2024, 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 July 31
2024
2023(1)
Personal andCommercial
WealthManagement
FinancialMarkets
USSF&I
Other
Total
Total
Operating results
Net interest income
913
219
(610)
326
(79)
769
870
Non-interest income
285
497
1,391
35
19
2,227
1,620
Total revenues
1,198
716
781
361
(60)
2,996
2,490
Non-interest expenses
615
416
320
115
75
1,541
1,404
Income before provisions for credit losses and income taxes
583
300
461
246
(135)
1,455
1,086
Provisions for credit losses
79
−
22
46
2
149
111
Income before income taxes (recovery)
504
300
439
200
(137)
1,306
975
Income taxes (recovery)
138
83
121
42
(111)
273
145
Net income
366
217
318
158
(26)
1,033
830
Items that have an impact on results
Net interest income
Taxable equivalent(2)
−
−
−
−
(15)
(15)
(88)
Amortization of the subscription receipt issuance costs(3)
−
−
−
−
(5)
(5)
−
Impact on net interest income
−
−
−
−
(20)
(20)
(88)
Non-interest income
Taxable equivalent(2)
−
−
−
−
(79)
(79)
(64)
Gain on the fair value remeasurement of equity interests(4)(5)
−
−
−
−
120
120
91
Management of the fair value changes related to the CWB acquisition(6)
−
−
−
−
(7)
(7)
−
Impact on non-interest income
−
−
−
−
34
34
27
Non-interest expenses
CWB acquisition and integration charges(7)
−
−
−
−
7
7
−
Expense related to changes to the Excise Tax Act(8)
−
−
−
−
−
−
25
Impact on non-interest expenses
−
−
−
−
7
7
25
Income taxes
Taxable equivalent(2)
−
−
−
−
(94)
(94)
(152)
Income taxes on the amortization of the subscription receipt issuance
costs(3)
−
−
−
−
(2)
(2)
