Canadian Western Bank : CWB reports first quarter 2021 financial and strategic performance

First Quarter 2021 Highlights⁽¹⁾ (compared to the same period in the prior year)

Adjusted EPS	Total revenue	Loans(2)	Branch-raised deposits	Common share dividend declared(3)
$0.93	$245.1 million	$30.6 billion	$17.6 billion	$0.29
Up 12%	Up 11%	Up 6% in total; Up 14% in Ontario	Up 20%	Consistent with the dividend declared last year and last quarter

(1)	Includes certain non-IFRS measures – refer to definitions provided on page 5 of this news release, with further detail provided on page 6 of the 2021 First Quarter Report to Shareholders.
(2)	Excludes the allowance for credit losses.
(3)	Declared by our Board of Directors on February 25, 2021.

This news release and accompanying financial highlights are supplementary to CWB's 2021 First Quarter Report to Shareholders and 2020 Annual Report and should be read in conjunction with those documents.

EDMONTON, AB, Feb. 26, 2021 /CNW/ - CWB Financial Group (TSX: CWB) (CWB) today announced financial performance for the three months ended January 31, 2021, with first quarter net income available to common shareholders of $79 million and adjusted earnings per common share of $0.93, up 25% and 24%, respectively, from the previous quarter. Pre-tax, pre-provision income was up 12% from the previous quarter and 9% from the same period in the prior year.

"We had a very strong start to the year, with our teams delivering first quarter financial performance that surpassed our expectations while continuing to execute on our strategic objectives," said Chris Fowler, President and CEO. "Our financial results benefited from very strong branch-raised deposit growth, strong loan growth in Ontario, and a reduction in our performing loan provision for credit losses from an improvement in the near-term macroeconomic outlook. Based on the first quarter results and improved outlook, we now expect to deliver full year mid-single digit percentage growth of adjusted earnings per share while continuing to advance our strategic priorities."

"Our strategy for growth is to expand full-service client relationships for both new and existing clients, which has been the primary driver of our very strong branch-raised deposit growth over the last two years. Growth in branch-raised deposits also lowers our funding costs, which helped support a two basis point sequential improvement in our net interest margin this quarter."

"Our strategic execution has also positioned us to capture increased market share within a larger addressable market, despite ongoing economic uncertainty. We prudently grew our loan portfolio, and delivered very strong growth in our strategically targeted general commercial portfolio and in Ontario."

"We remain growth-focused through ongoing business transformation and investments in digital capabilities to enhance our differentiated full-service client experience and position us to accelerate our growth as the economy recovers. With our launch of digital onboarding for all personal clients, new accounts can be opened virtually with the immediate ability to transact. We also continued our progress towards Advanced Internal Ratings Based (AIRB) approval. Incorporating the results of the 2021 parallel run of our AIRB tools and processes, we will resubmit our application to OSFI for review in the first half of 2022."

"Looking forward, we will continue to prudently manage through the current economic uncertainty, while executing against our strategic priorities to drive broad-based growth as the economy recovers. Thanks to the continued efforts of our dedicated teams, we have a tremendous opportunity in front of us and we are executing to realize our full potential across Canada."

Financial Performance

On June 1, 2020, we acquired the businesses of T.E. Wealth and Leon Frazer & Associates (the wealth acquisition). The operations of the wealth acquisition contributed to non-interest income growth while negatively affecting our efficiency ratio compared to the prior year. The wealth acquisition will support adjusted earnings per common share modestly at first, with further accretion beginning in fiscal 2022.

Q1 2021, compared to Q1 2020(1)	Common shareholders' net income of $79 million	Up 10%
	Adjusted EPS of $0.93	Up 12%
	Adjusted ROE of 11.5%	Up 20 bp(2)
	Efficiency ratio of 46.8% (45.1% excluding the impact of the wealth acquisition)	Worsened 130 bp (Improved 40 bp)

Compared to the same quarter last year, common shareholders' net income increased as 11% revenue growth more than offset the impact of higher non-interest expenses. We continued to accelerate our growth of full-service clients, which was the primary driver of very strong branch-raised deposit growth of 20%, which included a 36% increase in lower-cost demand and notice deposits. Net interest income increased 7% as the benefit of 6% loan growth, primarily driven by very strong growth in the general commercial portfolio, was partially offset by a seven basis point decline in net interest margin in the current low interest rate environment. Non-interest income growth of 56% was primarily related to the wealth acquisition. Non-interest expenses were up 15%, or approximately 4% excluding the wealth acquisition and the incremental costs associated with operating our AIRB tools and processes, as we continue to invest in our teams and technology to support strategic execution.

Q1 2021, compared to Q4 2020(1)	Common shareholders' net income of $79 million	Up 25%
	Adjusted EPS of $0.93	Up 24%
	Adjusted ROE of 11.5%	Up 200 bp(2)
	Efficiency ratio of 46.8%	Improved 410 bp

(1)	Includes certain non-IFRS measures – refer to definitions provided on page 5 of this news release, with further detail provided on page 6 of the 2021 First Quarter Report to Shareholders.
(2)	bp – basis point

Compared to the prior quarter, the increase in common shareholders' net income was driven by 4% revenue growth combined with a reduction in non-interest expenses and a lower provision for credit losses. Branch-raised deposits increased 6%, driven by very strong 10% growth in demand and notice deposits. Net interest income increased 4% due to the impacts of a two basis point improvement in net interest margin combined with 1% loan growth, with over 40% of that growth in Ontario. Non-interest expenses decreased 5% due to the expected seasonal decline in certain expenses, partially offset by higher costs associated with operating our AIRB tools and processes. The provision for credit losses declined eight basis points from last quarter and represented 18 basis points as a percentage of average loans. The provision for credit losses consisted of a 24 basis point provision on impaired loans and a six basis point recovery on performing loans due to improved macroeconomic forecasts related to the impact of the COVID-19 pandemic.

Strategic Performance

We continue to transform our capabilities to offer a superior full-service client experience through a complete range of in-person and digital channels, delivered by our highly engaged teams that operate within a client-centric, collaborative and change-ready culture. Our differentiated market position and transformation-focused strategy sets the stage for CWB to be a disruptive force in Canadian financial services, deliver profitable long-term growth and enhance shareholder returns for years to come. This quarter, we:

• continued our progress towards AIRB approval. Incorporating the results of the 2021 parallel run of our AIRB tools and processes, we will resubmit our application to the Office of the Superintendent of Financial Institutions Canada (OSFI) for review in the first half of 2022;
•  launched end-to-end digital onboarding for all personal clients that allows accounts to be opened virtually with immediate ability to transact. This functionality also supports efficient in-person and over-the-phone client onboarding;
• awarded special bonuses to our frontline teams to acknowledge their unwavering commitment throughout the COVID-19 pandemic;
• expanded measures to support our stand against systemic racism, with a new representation target for Black, Indigenous and racialized persons for our Board of Directors and Executive Committee by 2025; and,
• completed organizational redesign initiatives, including repositioning our branch footprint in Alberta and British Columbia to consolidate our teams into branches that feature our refreshed client-inspired design and to provide an enhanced full-service client experience in our target markets.

About CWB Financial Group

CWB Financial Group (CWB) is a diversified financial services organization known for a highly proactive client experience serving businesses and individuals across Canada. CWB's key business lines include full service business and personal banking offered through branch locations of Canadian Western Bank, and personal banking through our digital channels, including Motive Financial. Highly responsive nation-wide specialized financing is delivered under the banners of CWB Optimum Mortgage, CWB Equipment Financing, CWB National Leasing, CWB Maxium Financial and CWB Franchise Finance. Trust services are offered through CWB Trust Services. Comprehensive wealth management services are provided through CWB Wealth Management and its affiliate brands, including T.E. Wealth, Leon Frazer & Associates, CWB McLean & Partners, and Canadian Western Financial. As a public company on the Toronto Stock Exchange (TSX), CWB trades under the symbols "CWB" (common shares), "CWB.PR.B" (Series 5 preferred shares), "CWB.PR.C" (Series 7 preferred shares) and "CWB.PR.D" (Series 9 preferred shares). Learn more at www.cwb.com.

Fiscal 2021 First Quarter Results Conference Call

CWB's first quarter results conference call is scheduled for Friday, February 26, 2021, at 10:00 a.m. ET (8:00 a.m. MT). CWB's executives will comment on financial results and respond to questions from analysts.

The conference call may be accessed on a listen-only basis by dialing [phone] (Toronto) or [phone] (toll-free) and entering passcode: 6764219. The call will also be webcast live on CWB's website: www.cwb.com/investor-relations/quarterly-reports.

A replay of the conference call will be available until March 5, 2021 by dialing [phone] (Toronto) or [phone] (toll-free) and entering passcode: 6764219.

Forward-looking Statements

From time to time, we make written and verbal forward-looking statements. Statements of this type are included in our Annual Report and reports to shareholders and may be included in filings with Canadian securities regulators or in other communications such as press releases and corporate presentations. Forward-looking statements include, but are not limited to, statements about our objectives and strategies, targeted and expected financial results and the outlook for CWB's businesses or for the Canadian economy. Forward-looking statements are typically identified by the words "believe", "expect", "anticipate", "intend", "estimate", "may increase", "may impact", "goal", "focus", "potential", "proposed" and other similar expressions, or future or conditional verbs such as "will", "should", "would" and "could".

By their very nature, forward-looking statements involve numerous assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that our predictions, forecasts, projections, expectations and conclusions will not prove to be accurate, that our assumptions may not be correct and that our strategic goals may not be achieved.

A variety of factors, many of which are beyond our control, may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These factors include, but are not limited to, general business and economic conditions in Canada, including housing market conditions, the volatility and level of liquidity in financial markets, fluctuations in interest rates and currency values, the volatility and level of various commodity prices, changes in monetary policy, changes in economic and political conditions, material changes to trade agreements, transition to the Advanced Internal Ratings Based (AIRB) approach for calculating regulatory capital, legislative and regulatory developments, legal developments, the level of competition, the occurrence of natural catastrophes, outbreaks of disease or illness that affect local, national or international economies, changes in accounting standards and policies, information technology and cyber risk, the accuracy and completeness of information we receive about customers and counterparties, the ability to attract and retain key personnel, the ability to complete and integrate acquisitions, reliance on third parties to provide components of business infrastructure, changes in tax laws, technological developments, unexpected changes in consumer spending and saving habits, timely development and introduction of new products, and our ability to anticipate and manage the risks associated with these factors. It is important to note that the preceding list is not exhaustive of possible factors.

Additional information about these factors can be found in the Risk Management section of our annual Management's Discussion and Analysis (MD&A). These and other factors should be considered carefully, and readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. Any forward-looking statements contained in this document represent our views as of the date hereof. Unless required by securities law, we do not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time by us or on our behalf. The forward-looking statements contained in this document are presented for the purpose of assisting readers in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes. 

Assumptions about the performance of the Canadian economy over the forecast horizon and how it will affect our business are material factors considered when setting organizational objectives and targets. In determining expectations for economic growth, we consider our own forecasts, economic data and forecasts provided by the Canadian government and its agencies, as well as certain private sector forecasts. These forecasts are subject to inherent risks and uncertainties that may be general or specific. The full extent of the impact that the COVID-19 pandemic, including government and regulatory responses to the outbreak, will have on the Canadian economy and our business is highly uncertain and difficult to predict at this time. Where relevant, material economic assumptions underlying forward-looking statements are disclosed within the Outlook and Allowance for Credit Losses sections of our interim and annual MD&A. 

Non-IFRS Measures

We use a number of financial measures to assess our performance against strategic initiatives and operational benchmarks. Non-IFRS measures provide readers with an enhanced understanding of how we view our ongoing performance. These measures may also provide the ability to analyze trends related to profitability and the effectiveness of our operations and strategies, and determine compliance against regulatory standards. To arrive at certain non-IFRS measures, we make adjustments to the results prepared in accordance with International Financial Reporting Standards (IFRS). Adjustments relate to items which we believe are not indicative of underlying operating performance. Some of these financial measures do not have standardized meanings prescribed by IFRS, and therefore, may not be comparable to similar measures presented by other financial institutions. The non-IFRS measures used in this news release are calculated as follows:

• Adjusted non-interest expenses – total non-interest expenses, excluding pre-tax amortization of acquisition-related intangible assets, and acquisition and integration costs (see calculation on page 6 of the 2021 First Quarter Report to Shareholders). Acquisition and integration costs include direct and incremental costs incurred as part of the execution and ongoing integration of the acquisition of the businesses of T.E. Wealth and Leon Frazer & Associates.
• Adjusted common shareholders' net income – total common shareholders' net income, excluding the amortization of acquisition-related intangible assets, and acquisition and integration costs, net of tax (see calculation on page 6 of the 2021 First Quarter Report to Shareholders).
• Pre-tax, pre-provision income – total revenue less adjusted non-interest expenses (see calculation on page 6 of the 2021 First Quarter Report to Shareholders).
• Adjusted earnings per common share – diluted earnings per common share calculated with adjusted common shareholders' net income. Prior to the third quarter of fiscal 2020, this metric was named 'Adjusted cash earnings per common share'.
• Return on common shareholders' equity – annualized common shareholders' net income divided by average common shareholders' equity.
• Adjusted return on common shareholders' equity – annualized adjusted common shareholders' net income divided by average common shareholders' equity. 
• Return on assets – annualized common shareholders' net income divided by average total assets.
• Efficiency ratio – adjusted non-interest expenses divided by total revenue. 
• Net interest margin – annualized net interest income divided by average total assets.
• Provision for credit losses on total loans as a percentage of average loans – annualized provision for credit losses on loans, committed but undrawn credit exposures and letters of credit divided by average total loans. Provisions for credit losses related to debt securities measured at fair value through other comprehensive income (FVOCI) and other financial assets are excluded.
• Provision for credit losses on impaired loans as a percentage of average loans – annualized provision for credit losses on impaired loans divided by average total loans.
• Provision for credit losses on performing loans as a percentage of average loans – annualized provision for credit losses on performing loans (Stage 1 and 2) divided by average total loans.
• Operating leverage – growth rate of total revenue less growth rate of adjusted non-interest expenses.
• Basel III common equity Tier 1, Tier 1, Total capital, and leverage ratios – calculated in accordance with guidelines issued by OSFI.
• Risk-weighted assets – on and off-balance sheet assets assigned a risk weighting calculated in accordance with the Standardized approach guideline issued by OSFI. 
• Average balances – average daily balances. 

Selected Financial Highlights⁽¹⁾

	For the three months ended									Change from January 31 2020
(unaudited) (thousands, except per share amounts)		January 31 2021			October 31 2020			January 31 2020
Results from Operations
Net interest income	$	215,453		$	206,640		$	201,010		7	%
Non-interest income		29,635			29,935			18,962		56
Total revenue		245,088			236,575			219,972		11
Pre-tax, pre-provision income		130,474			116,267			119,788		9
Common shareholders' net income		79,237			63,380			71,943		10
Earnings per common share
Basic		0.91			0.73			0.82		11
Diluted		0.91			0.73			0.82		11
Adjusted		0.93			0.75			0.83		12
Return on common shareholders' equity		11.3	%		9.2	%		11.2	%	10	bp(6)
Adjusted return on common shareholders' equity		11.5			9.5			11.3		20
Return on assets		0.91			0.75			0.91		-
Net interest margin		2.47			2.45			2.54		(7)
Efficiency ratio		46.8			50.9			45.5		130
Operating leverage(2)		(3.0)			(5.9)			(2.6)		(40)
Provision for credit losses on total loans as a percentage of average loans(3)		0.18			0.26			0.18		-
Provision for credit losses on impaired loans as a percentage of average loans(3)		0.24			0.10			0.15		9
Number of full-time equivalent staff		2,498			2,505			2,289		9	%
Per Common Share
Cash dividends	$	0.29		$	0.29		$	0.28		4	%
Book value		32.24			31.76			29.81		8
Closing market value		28.45			24.50			32.72		(13)
Common shares outstanding (thousands)		87,101			87,100			87,273		-
Balance Sheet and Off-Balance Sheet Summary
Assets	$	35,301,768		$	33,937,865		$	31,571,598		12	%
Loans(4)		30,566,902			30,167,719			28,766,032		6
Deposits		28,635,312			27,310,354			25,640,876		12
Debt		2,572,638			2,424,323			2,243,891		15
Shareholders' equity		3,373,145			3,331,538			2,991,732		13
Wealth management
Assets under management		6,763,658			6,229,674			2,152,255		214
Assets under advisement and administration		2,372,393			2,224,839			357,051		564
Assets under administration - other(5)		11,971,322			11,081,581			9,656,627		24
Capital Adequacy
Common equity Tier 1 ratio		8.8	%		8.8	%		9.1	%	(30)	bp(6)
Tier 1 ratio		10.8			10.9			10.6		20
Total ratio		12.6			12.6			11.9		70

(1)	Includes certain non-IFRS measures – refer to definitions provided on page 5 of this news release, with further detail provided on page 6 of the 2021 First Quarter Report to Shareholders.
(2)	Excluding the impact of the wealth acquisition, our operating leverage ratio would have been positive 1.1% and negative 2.2% for the first quarter of fiscal 2021 and fourth quarter of fiscal 2020, respectively.
(3)	Includes provisions for credit losses on loans, committed but undrawn credit exposures and letters of credit.
(4)	Excludes the allowance for credit losses.
(5)	Comprised of trust assets under administration, third-party leases under administration and loans under service agreements.
(6)	bp – basis point

 

SOURCE CWB Financial Group

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