Second Quarter 2020 Highlights(1) (compared to the same period in the prior year)
Adjusted cash EPS | Total revenue | Loans(2) | Branch-raised | Common share |
Down 19% | Up 2% | Up 7% in total; 10% in | Up 20% |
|
(1) | Highlights include certain non-IFRS measures – refer to definitions provided on page 5 of this news release, with further detail provided on page 6 of the 2020 Second Quarter Report to Shareholders. |
(2) | Excludes the allowance for credit losses. |
(3) | Declared by our Board of Directors on |
This news release and accompanying financial highlights are supplementary to CWB's 2020 Second Quarter Report to Shareholders and 2019 Annual Report and should be read in conjunction with those documents. |
"We started this quarter with strong financial performance, including robust branch-raised deposit growth and very strong new lending both within our strategically targeted general commercial portfolio and in |
Financial Performance
Q2 2020, | Common shareholders' net income of | Down 17% |
Adjusted cash EPS of | Down 19% | |
Adjusted ROE of 8.0% | Down 300 bp(2) | |
Operating leverage of negative 0.8% | Improved 230 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 2020 Second Quarter Report to Shareholders. |
(2) | bp – basis point |
Compared to the prior year, common shareholders' net income was down as a 2% increase in total revenue was more than offset by an elevated estimated performing loan provision for credit losses to reflect a more pessimistic economic outlook. Net interest income was flat, as loan growth of 7%, including very strong growth in general commercial loans, was offset by a 23 basis point contraction in net interest margin. In line with our strategy, we delivered robust branch-raised deposit growth of 20%, which included 31% growth of notice and demand deposits, contributing to a 17% reduction in higher cost broker deposits. Total revenue was bolstered by higher net gains on securities from activities to manage our cash and securities portfolio. Non-interest expenses were up 3%, reflecting investments to support overall business growth and continued execution of our targeted business transformation activities. Acquisition-related fair value changes were
Q2 2020, | Common shareholders' net income of | Down 29% |
Adjusted cash EPS of | Down 28% | |
Adjusted ROE of 8.0% | Down 330 bp(2) | |
Operating leverage of negative 0.8% | Improved 180 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 2020 Second Quarter Report to Shareholders. |
(2) | bp – basis point |
The reduction in common shareholders' net income was driven by an increase in the estimated provision for credit losses on performing loans and lower total revenue, both as a result of the economic slowdown. Our sequential loan growth of 2% was solid, with no significant impact from either increased utilization of available lines of credit or payment deferrals. Branch-raised deposit growth of 5% reflects very strong performance by
YTD 2020, | Common shareholders' net income of | Down 4% |
Adjusted cash EPS of | Down 8% | |
Adjusted ROE of 9.6% | Down 180 bp(2) | |
Operating leverage of negative 1.7% | Worsened 30 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 2020 Second Quarter Report to Shareholders. |
(2) | bp – basis point |
The decline in common shareholders' net income was driven by higher total revenue more than offset by an increase in the estimated provision for credit losses on performing loans, as discussed above, and higher non-interest expenses as we continued to invest in people and technology to support ongoing strategic execution. Higher net interest income was driven by 7% loan growth partially offset by a 15 basis point decrease in net interest margin. During 2019, we recognized an
Strategic Performance
The continuation of our focused business transformation and investments in digital capabilities, supported by our talented and agile teams, will enhance our differentiated full-service client experience and position us for accelerated growth as the economy stabilizes. This quarter, we:
- submitted our AIRB formal application with regulatory approval expected within fiscal 2020;
- announced the acquisition of T.E. Wealth and
Leon Frazer & Associates , leading providers of financial planning and wealth management services targeting high-net-worth Canadian families, that is expected to close onJune 1st ; - made strong progress on the improvement in our digital capabilities and remained committed to achievement of key milestones despite the impacts of COVID-19; and
- were recognized by Great Places to Work CanadaTM as one of the 50 Best Workplaces in
Canada for 2020.
About CWB
Fiscal 2020 Second Quarter Results Conference Call |
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 will 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
Additional information about these factors can be found in the Risk Management section of our interim and/or 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. 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 businesses 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.
Where relevant, material economic assumptions underlying forward-looking statements are disclosed within the Outlook section of our annual MD&A. The emergence of COVID-19 has cast uncertainty on each of the assumptions described in our annual MD&A and we caution that they no longer remain valid. Given the continued rapid pace of change, it is premature to make further assumptions about these matters. The full extent of the impact that COVID-19, 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. See the Impact of COVID-19 and Our Response, Financial Results and Outlook, and Risk Management sections of our interim MD&A for more information.
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 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 the pre-tax amortization of acquisition-related intangible assets (see calculation on page 6 of the 2020 Second Quarter Report to Shareholders).
- Adjusted common shareholders' net income – total common shareholders' net income, excluding the amortization of acquisition-related intangible assets and acquisition-related fair value changes, net of tax (see calculation on page 6 of the 2020 Second Quarter Report to Shareholders).
- Pre-tax, pre-provision income – total revenue less adjusted non-interest expenses (see calculation on page 6 of the 2020 Second Quarter Report to Shareholders).
- Adjusted cash earnings per common share – diluted earnings per common share calculated with adjusted common shareholders' net income.
- 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.
- Common share dividend payout ratio – common share dividends declared during the past twelve months divided by common shareholders' net income earned over the same period.
- Basel III common equity Tier 1, Tier 1, Total capital, and leverage ratios – calculated in accordance with guidelines issued by the Office of the Superintendent
of Financial Institutions Canada (OSFI); - Risk-weighted assets – on and off-balance sheet assets assigned a risk weighting calculated in accordance with the Standardized approach guidelines issued by OSFI.
- Average balances – average daily balances.
For the three months ended | Change from 2019 | For the six months ended | Change from 2019 | |||||||||||||||||
(unaudited) | 2019 | |||||||||||||||||||
($ thousands, except per share amounts) | ||||||||||||||||||||
Results from Operations | ||||||||||||||||||||
Net interest income | $ | 190,988 | $ | 201,010 | $ | 191,057 | - | % | $ | 391,998 | $ | 384,399 | 2 | % | ||||||
Non-interest income | 23,376 | 18,962 | 18,771 | 25 | 42,338 | 37,868 | 12 | |||||||||||||
Total revenue | 214,364 | 219,972 | 209,828 | 2 | 434,336 | 422,267 | 3 | |||||||||||||
Pre-tax, pre-provision income | 113,314 | 119,788 | 111,692 | 1 | 233,102 | 229,765 | 1 | |||||||||||||
Common shareholders' net income | 51,381 | 71,943 | 61,965 | (17) | 123,324 | 128,464 | (4) | |||||||||||||
Earnings per common share | ||||||||||||||||||||
Basic | 0.59 | 0.82 | 0.71 | (17) | 1.41 | 1.46 | (3) | |||||||||||||
Diluted | 0.59 | 0.82 | 0.71 | (17) | 1.41 | 1.46 | (3) | |||||||||||||
Adjusted cash | 0.60 | 0.83 | 0.74 | (19) | 1.43 | 1.55 | (8) | |||||||||||||
Return on common shareholders' equity | 7.9 | % | 11.2 | % | 10.5 | % | (260) | bp(5) | 9.5 | % | 10.8 | % | (130) | bp(5) | ||||||
Adjusted return on common shareholders' | ||||||||||||||||||||
equity | 8.0 | 11.3 | 11.0 | (300) | 9.6 | 11.4 | (180) | |||||||||||||
Return on assets | 0.65 | 0.91 | 0.85 | (20) | 0.78 | 0.88 | (10) | |||||||||||||
Efficiency ratio | 47.1 | 45.5 | 46.8 | 30 | 46.3 | 45.6 | 70 | |||||||||||||
Net interest margin | 2.40 | 2.54 | 2.63 | (23) | 2.47 | 2.62 | (15) | |||||||||||||
Operating leverage | (0.8) | (2.6) | (3.1) | 230 | (1.7) | (1.4) | (30) | |||||||||||||
Provision for credit losses on total loans as | ||||||||||||||||||||
a percentage of average loans(3) | 0.49 | 0.18 | 0.23 | 26 | 0.34 | 0.24 | 10 | |||||||||||||
Provision for credit losses on impaired | ||||||||||||||||||||
loans as a percentage of average loans(3) | 0.22 | 0.15 | 0.22 | - | 0.19 | 0.22 | (3) | |||||||||||||
Number of full-time equivalent staff | 2,325 | 2,289 | 2,263 | 3 | % | 2,325 | 2,263 | 3 | % | |||||||||||
Per Common Share | ||||||||||||||||||||
Cash dividends | $ | 0.29 | $ | 0.28 | $ | 0.27 | 7 | % | $ | 0.57 | $ | 0.53 | 8 | % | ||||||
Book value | 31.24 | 29.81 | 28.20 | 11 | 31.24 | 28.20 | 11 | |||||||||||||
Closing market value | 22.03 | 32.72 | 30.04 | (27) | 22.03 | 30.04 | (27) | |||||||||||||
Common shares outstanding (thousands) | 87,100 | 87,273 | 87,239 | - | 87,100 | 87,239 | - | |||||||||||||
Balance Sheet and Off-Balance Sheet | ||||||||||||||||||||
Assets | $ | 32,958,184 | $ | 31,571,598 | $ | 30,054,181 | 10 | % | ||||||||||||
Loans(4) | 29,197,575 | 28,766,032 | 27,352,637 | 7 | ||||||||||||||||
Deposits | 26,147,086 | 25,640,876 | 24,718,173 | 6 | ||||||||||||||||
Debt | 2,813,882 | 2,243,891 | 1,887,541 | 49 | ||||||||||||||||
Shareholders' equity | 3,110,775 | 2,991,732 | 2,850,398 | 9 | ||||||||||||||||
Assets under administration | 10,023,466 | 10,013,678 | 8,856,962 | 13 | ||||||||||||||||
Assets under management | 1,981,062 | 2,152,255 | 2,137,489 | (7) | ||||||||||||||||
Capital Adequacy | ||||||||||||||||||||
Common equity Tier 1 ratio | 9.1 | % | 9.1 | % | 9.1 | % | - | bp(5) | ||||||||||||
Tier 1 ratio | 10.5 | 10.6 | 10.7 | (20) | ||||||||||||||||
Total ratio | 11.9 | 11.9 | 11.9 | - |
(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 2020 Second Quarter Report to Shareholders. |
(2) | Results for periods beginning on |
(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) | bp – basis point |
SOURCE
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