Strong execution against balanced growth strategic objectives with ongoing loan portfolio diversification
A record
Full-year adjusted cash earnings per common share of
"Fiscal 2019 was another strong year of operating performance and execution of our transformational strategy. We generated solid loan growth with further geographic and industry diversification, including strong 11% growth in |
"Our strategy for long-term value creation is to address the unmet banking needs of Canadian entrepreneurs," continued |
"This coming year also includes our expected transition to the Advanced approach for regulatory capital and risk management. This will represent another tremendous accomplishment for CWB, and is a key transformation to unleash our full growth potential. It will sharpen our view of overall portfolio risk, and over time, it will enhance our capital allocation capabilities while making us more competitive on price and offering. Our strategy is focused to translate these new capabilities – from client experience to capital deployment – into strong, scalable, value-creating, long-term growth. As we close fiscal 2019, I want to thank our people for their passion and commitment to help both our clients and CWB achieve our respective goals. There is no doubt in my mind that our shared future looks more exciting than ever before." |
Fourth Quarter 2019 Highlights(1)(2) (compared to the same period in the prior year)
- Common shareholders' net income of
$68 million , up 5%, and pre-tax, pre-provision income of$114 million , up 3%. - Diluted and adjusted cash earnings per common share of
$0.77 and$0.78 , up 7% and nil, respectively, with the higher growth rate of diluted earnings per common share primarily reflecting no acquisition-related fair value changes this quarter. - Total revenue of
$221 million , up 6%, with 7% growth of net interest income and stable non-interest income. - Net interest margin of 2.55%, down six basis points compared to the fourth quarter last year and five basis points from the prior quarter.
- Strong credit quality with the provision for credit losses representing 19 basis points of average loans, unchanged from last year and last quarter.
- Very strong Basel III regulatory capital ratios under the Standardized approach for calculating risk-weighted assets of 9.1% common equity Tier 1 (CET1), 10.7% Tier 1 and 12.8% Total capital.
Full Year 2019 Highlights(1)(2) (compared to 2018)
- Solid performance with common shareholders' net income of
$267 million , up 7%, pre-tax, pre-provision income of$461 million , up 6%, and total revenue of$862 million , up 7%. - Diluted and adjusted cash earnings per common share of
$3.04 and$3.15 , up 9% and 5%, respectively. - Full-year operating leverage of negative 1.8% as revenue growth was outpaced by growth of expenses reflecting continued investment in strategic execution.
- Solid loan growth of 8%, with moderate growth in the fourth quarter partly related to higher than normal payouts, reflecting successful project completions in our real estate portfolio.
- Very strong 15% overall growth in general commercial loans, 13% growth in Central and
Eastern Canada and expansion in every province. - Very strong branch-raised deposit growth of 12%, including 14% growth of demand and notice deposits, contributing to a record
$1.5 billion increase and a reduction in the outstanding balance of broker deposits compared to last year. - Stable full-year net interest margin of 2.60%.
- Stable credit quality with the provision for credit losses representing 21 basis points of average loans, compared to 20 basis points last year.
- Gross impaired loans represented 0.52% of gross loans at quarter-end, unchanged from last year and up from 0.51% in the previous quarter.
- Delivered an 8% increase to CWB's annual common share dividend.
(1) | Highlights include certain non-IFRS measures – refer to definitions provided on Page 12 of this news release |
(2) | Effective |
Execution against
Balanced Growth Objective | Strategic Execution during fiscal 2019 | |
Full-service client growth with a focus on | • | Solid annual loan growth of 8%, including 13% growth in Central and |
• | Increased the proportion of the loan portfolio in Central and | |
• | Increased business diversification, with 15% overall growth of general commercial loans and 9% growth of equipment financing and leasing | |
• | Recognized as a | |
Growth and diversification of funding | • | Very strong branch-raised deposit growth of 12%, including 14% growth in the demand and notice category, and 10% growth in term deposit |
• | Growth in debt capital markets funding with three successful senior deposit note issuances totaling | |
•
| Growth in debt related to securitization to support originations of both equipment loans and leases, and residential mortgages | |
Optimized capital and risk management | • | Expect to submit final application and receive regulatory approval in fiscal 2020 for transition to the AIRB approach |
Fiscal 2019 Financial Performance Compared to Medium-term (3-5 year) Target Ranges
Key Metrics(1) | Medium-term | 2019 Context |
Adjusted cash earnings per common | 7 - 12% | Delivered 5% |
Adjusted return on common | 12 - 15% | Delivered 11.3% |
Operating leverage | Positive | Delivered negative 1.8% |
Common equity Tier 1 capital ratio under | Strong | Delivered a very strong ratio of 9.1% |
Common share dividend payout ratio | ~30% | Delivered 35% |
(1) | Refer to definitions provided on Page 12 of this news release |
In view of our planned transition to the AIRB approach for capital and risk management in fiscal 2020, we have discontinued our medium-term targets. We introduced these targets in fiscal 2016, and designed them to be effective over a three- to five-year period under the Standardized approach for calculating risk-weighted assets. We are confident our transition to the AIRB approach will support higher growth and profitability from our differentiated business model over the medium-term. However, the magnitude of capital available for deployment upon transition to the AIRB approach is uncertain at this time. We expect to establish revised multi-year performance expectations incorporating benefits of the AIRB transition following formal regulatory approval. Expectations related to key performance metrics for fiscal 2020, on a standalone basis, can be found in the Outlook section of CWB's annual Management's Discussion and Analysis (MD&A), dated
About
Fiscal 2019 Fourth Quarter Results Conference Call |
The conference call may be accessed on a listen-only basis by dialing (416) 764-8688 ( |
www.cwb.com/investor-relations/quarterly-reports |
A replay of the conference call will be available until |
Selected Financial Highlights(1)
For the three months ended | Change from 2018 | For the year ended | Change from 2018 | |||||||||||||||||
(unaudited) |
|
| October 31 |
| 2018 | |||||||||||||||
($ thousands, except per share amounts) | ||||||||||||||||||||
Results from Operations | ||||||||||||||||||||
Net interest income | $ | 201,439 | $ | 199,746 | $ | 189,093 | 7 | % | $ | 785,584 | $ | 724,990 | 8 | % | ||||||
Non-interest income | 19,414 | 18,738 | 19,473 | - | 76,020 | 78,368 | (3) | |||||||||||||
Total revenue | 220,853 | 218,484 | 208,566 | 6 | 861,604 | 803,358 | 7 | |||||||||||||
Pre-tax, pre-provision income | 114,390 | 116,975 | 111,182 | 3 | 461,130 | 436,188 | 6 | |||||||||||||
Common shareholders' net income | 67,512 | 70,964 | 64,501 | 5 | 266,940 | 249,256 | 7 | |||||||||||||
Earnings per common share | ||||||||||||||||||||
Basic | 0.77 | 0.81 | 0.73 | 5 | 3.05 | 2.81 | 9 | |||||||||||||
Diluted | 0.77 | 0.81 | 0.72 | 7 | 3.04 | 2.79 | 9 | |||||||||||||
Adjusted cash | 0.78 | 0.82 | 0.78 | - | 3.15 | 3.01 | 5 | |||||||||||||
Return on common shareholders' equity | 10.6 | % | 11.3 | % | 11.1 | % | (50) | bp(5) | 10.9 | % | 11.0 | % | (10) | bp(5) | ||||||
Adjusted return on common shareholders' | ||||||||||||||||||||
equity | 10.7 | 11.4 | 11.9 | (120) | 11.3 | 11.9 | (60) | |||||||||||||
Return on assets | 0.86 | 0.92 | 0.89 | (3) | 0.88 | 0.89 | (1) | |||||||||||||
Efficiency ratio | 48.2 | 46.5 | 46.7 | 150 | 46.5 | 45.7 | 80 | |||||||||||||
Net interest margin | 2.55 | 2.60 | 2.61 | (6) | 2.60 | 2.60 | - | |||||||||||||
Operating leverage | (3.4) | (1.1) | 0.1 | (350) | (1.8) | 1.9 | (370) | |||||||||||||
Provision for credit losses on total loans as | ||||||||||||||||||||
a percentage of average loans(3)(4) | 0.19 | 0.19 | 0.19 | - | 0.21 | 0.20 | 1 | |||||||||||||
Provision for credit losses on impaired | ||||||||||||||||||||
loans as a percentage of average loans(3)(4) | 0.18 | 0.22 | 0.19 | (1) | 0.21 | 0.19 | 2 | |||||||||||||
Number of full-time equivalent staff | 2,278 | 2,288 | 2,178 | 5 | % | 2,278 | 2,178 | 5 | % | |||||||||||
Per Common Share | ||||||||||||||||||||
Cash dividends | $ | 0.28 | $ | 0.27 | $ | 0.26 | 8 | % | $ | 1.08 | $ | 1.00 | 8 | % | ||||||
Book value | 29.29 | 28.82 | 26.09 | 12 | 29.29 | 26.09 | 12 | |||||||||||||
Closing market value | 33.35 | 30.83 | 30.62 | 9 | 33.35 | 30.62 | 9 | |||||||||||||
Common shares outstanding (thousands) | 87,250 | 87,201 | 88,952 | (2) | 87,250 | 88,952 | (2) | |||||||||||||
Balance Sheet and Off-Balance Sheet | ||||||||||||||||||||
Assets | $ | 31,424,235 | $ | 30,930,991 | $ | 29,021,463 | 8 | % | ||||||||||||
Loans | 28,365,893 | 28,135,314 | 26,204,599 | 8 | ||||||||||||||||
Deposits | 25,351,361 | 24,822,600 | 23,699,957 | 7 | ||||||||||||||||
Debt | 2,412,293 | 2,398,548 | 2,007,854 | 20 | ||||||||||||||||
Shareholders' equity | 2,945,810 | 2,903,222 | 2,585,752 | 14 | ||||||||||||||||
Assets under administration | 9,298,745 | 8,748,062 | 8,368,716 | 11 | ||||||||||||||||
Assets under management | 2,099,569 | 2,084,757 | 2,100,802 | - | ||||||||||||||||
Capital Adequacy | ||||||||||||||||||||
Common equity Tier 1 ratio | 9.1 | % | 9.0 | % | 9.2 | % | (10) | bp(5) | ||||||||||||
Tier 1 ratio | 10.7 | 10.6 | 10.3 | 40 | ||||||||||||||||
Total ratio | 12.8 | 12.8 | 11.9 | 90 |
(1) | Non-IFRS measures defined on page 12 |
(2) | Amounts for fiscal 2019 have been prepared in accordance with IFRS 9 (refer to Notes 1 and 2 of the annual consolidated financial statements). Fiscal 2018 comparatives have been |
(3) | Under IFRS 9, provisions for credit losses related primarily to loans, committed but undrawn credit exposures and letters of credit, and also apply to debt securities measured at fair |
(4) | Includes provisions for credit losses on loans, committed but undrawn credit exposures and letters of credit |
(5) | bp – basis point change |
Financial Summary
IFRS 9
CWB adopted International Financial Reporting Standard (IFRS) 9 Financial Instruments (IFRS 9), which replaces International Accounting Standard (IAS) 39 Financial Instruments: Classification and Measurement (IAS 39) for the fiscal year beginning
The most significant impact to CWB with the transition to IFRS 9 is the introduction of an expected credit loss (ECL) approach for measuring impairment that is applicable to financial assets measured at amortized cost, debt securities measured at fair value through other comprehensive income (FVOCI), and certain off-balance sheet loan commitments and financial guarantee contracts. The implementation of an ECL approach under IFRS 9, which results in allowances for credit losses being recognized on financial assets regardless of whether there has been an actual loss event, is a significant change from the incurred loss model under IAS 39.
Under IFRS 9, CWB refers to allowances and provisions for credit losses on impaired loans (Stage 3) and performing loans (Stages 1 and 2). CWB's specific allowances under IAS 39 are consistent with Stage 3 allowances for credit losses under IFRS 9, while the collective allowance under IAS 39 is replaced by Stage 1 and 2 allowances for credit losses under IFRS 9.
Forward-looking Statements
From time to time, CWB makes written and verbal forward-looking statements. Statements of this type are included in the 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 CWB's 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 management's predictions, forecasts, projections, expectations and conclusions will not prove to be accurate, that its assumptions may not be correct and that its 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 CWB's annual 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 CWB's actual results to differ materially from the expectations expressed in such forward-looking statements. Unless required by securities law, CWB does not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time by it or on its behalf.
Assumptions about the performance of the Canadian economy over the forecast horizon and how it will affect CWB's businesses are material factors considered when setting organizational objectives and targets. In determining expectations for economic growth, CWB considers its 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 sections of CWB's MD&A for the year ended
This financial summary, dated
Strategic Transactions
On
On
Overview of Financial Performance
Q4 2019 vs. Q4 2018
Common shareholders' net income of
Q4 2019 vs. Q3 2019
Common shareholders' net income and pre-tax, pre-provision income were down 5% and 2%, respectively. Total revenue was up 1%. Growth in net interest income of 1% reflected 1% loan growth, partially offset by a five basis point decrease in net interest margin. Moderate loan growth partly reflected payouts from successful project completions in our real estate portfolio. Within net interest margin, positive changes in funding mix from higher growth in demand and notice deposits was more than offset by changes in asset mix, lower asset yields and increased funding costs. Non-interest income was up 4% and the provision for credit losses as a percentage of average loans was unchanged. Non-interest expenses were 5% higher, reflecting the factors noted above. The fourth quarter also included higher consulting fees and customary seasonal increases in employee training and community investment. Diluted and adjusted cash earnings per common share were both down 5%.
2019 vs. 2018
Common shareholders' net income of
Adjusted ROE and ROA
The fourth quarter adjusted return on common shareholders' equity (ROE) of 10.7% was 120 basis points lower compared to the same period last year. The change mainly reflects 10% growth of average common shareholders' equity from the fourth quarter last year, with an increase in accumulated other comprehensive income and retained earnings growth partially offset by the impact of common shares purchased for cancellation, compared to a 1% reduction in fourth quarter adjusted common shareholders' net income.
Adjusted ROE was 70 basis points lower on a sequential basis, mainly reflecting 4% lower adjusted net income this quarter and 2% growth in average common shareholders' equity.
Full-year adjusted ROE of 11.3% was 60 basis points lower than last year, as 3% growth of adjusted common shareholders' net income was more than offset by the increase in average common shareholders' equity driven by higher accumulated other comprehensive income and retained earnings growth, partially offset by the impact of common shares purchased for cancellation.
The fourth quarter return on assets (ROA) of 0.86% was three basis points lower than the prior year as growth of net income was outpaced by growth of average assets. ROA was down six basis points from the prior quarter, reflecting the same factors. ROA for the year of 0.88% was one basis point lower than last year as growth of common shareholders' net income was slightly below average asset growth.
Efficiency ratio and operating leverage
The fourth quarter efficiency ratio of 48.2%, which measures adjusted non-interest expenses divided by total revenue, compares to 46.7% in the same period last year and 46.5% in the previous quarter. Compared to last year and last quarter, revenue growth was outpaced by growth of expenses, mainly reflecting continued investment in strategic execution.
The full-year efficiency ratio of 46.5% compares to 45.7% last year, reflecting the same factors noted above.
Operating leverage, which is calculated as the growth rate of total revenue less the growth rate of adjusted non-interest expenses, over the last 12 months was negative 1.8%, compared to positive 1.9% last year. Operating leverage in 2019 was impacted by the same factors as our full-year efficiency ratio. In 2018, revenue growth benefited from very strong loan growth, a four basis point improvement in net interest margin and gains from the CWT strategic transactions.
Loans
Total loans, excluding the allowance for credit losses, of
(unaudited) ($ millions) |
| % of total as at 2019 |
|
| % change from | |||||
General commercial loans | $ | 8,600 | 30 | % | $ | 8,503 | $ | 7,458 | 15 | % |
Personal loans and mortgages | 5,690 | 20 | 5,591 | 5,247 | 8 | |||||
Equipment financing and leasing | 5,192 | 18 | 5,069 | 4,779 | 9 | |||||
Commercial mortgages | 5,088 | 18 | 5,064 | 4,865 | 5 | |||||
Real estate project loans | 3,752 | 13 | 3,866 | 3,855 | (3) | |||||
Oil and gas production loans | 155 | 1 | 148 | 129 | 20 | |||||
Total loans | $ | 28,477 | 100 | % | $ | 28,241 | $ | 26,333 | 8 | % |
(1) | Total loans outstanding by lending sector exclude the allowance for credit losses |
Growth in dollar terms was led by the strategically targeted general commercial category with a 15% increase (
Total loan growth was moderate on a sequential basis at
(unaudited) ($ millions) |
| % of total as at 2019 |
|
| % change | |||||
$ | 9,348 | 33 | % | $ | 9,396 | $ | 8,894 | 5 | % | |
9,073 | 32 | 8,915 | 8,395 | 8 | ||||||
6,265 | 22 | 6,186 | 5,622 | 11 | ||||||
1,459 | 5 | 1,435 | 1,404 | 4 | ||||||
887 | 3 | 886 | 680 | 30 | ||||||
824 | 3 | 800 | 773 | 7 | ||||||
Other | 621 | 2 | 623 | 565 | 10 | |||||
Total loans | $ | 28,477 | 100 | % | $ | 28,241 | $ | 26,333 | 8 | % |
(2) | Total loans outstanding by province exclude the allowance for credit losses |
Central and
On a sequential basis, total outstanding loans were up across almost all provinces, with the strongest growth apparent in
Credit Quality
Credit quality continues to reflect our secured lending business model, disciplined underwriting practices and proactive loan management.
For the three months ended | Change from
| ||||||||||
(unaudited) | October 31 | July 31 |
| ||||||||
($ thousands) | |||||||||||
Gross impaired loans, beginning of period | $ | 143,390 | $ | 168,321 | $ | 135,430 | 6 | % | |||
New formations | 55,653 | 39,094 | 31,977 | 74 | |||||||
Reductions, impaired accounts paid down or returned to performing status | (40,795) | (43,166) | (15,724) | 159 | |||||||
Write-offs | (9,998) | (20,859) | (13,811) | (28) | |||||||
Total(1) | $ | 148,250 | $ | 143,390 | $ | 137,872 | 8 | % | |||
Balance of the ten largest impaired accounts | $ | 52,795 | $ | 49,500 | $ | 56,748 | (7) | % | |||
Total number of accounts classified as impaired(2) | 330 | 303 | 214 | 54 | |||||||
Gross impaired loans as a percentage of gross loans | 0.52 | % | 0.51 | % | 0.52 | % | - | bp(3) |
(1) | Gross impaired loans include foreclosed assets held for sale with a carrying value of |
(2) | Total number of accounts excludes |
(3) | bp – basis point change |
The dollar level of gross impaired loans at
The level of gross impaired loans fluctuates as loans become impaired and are subsequently resolved, and does not directly reflect the dollar value of expected write-offs given tangible security held in support of lending exposures. The overall loan portfolio is reviewed regularly with credit decisions undertaken on a case-by-case basis to provide early identification of possible adverse trends.
As at
Provision for credit losses
The provision for credit losses was estimated under IFRS 9 beginning in fiscal 2019, with the provision in fiscal 2018 estimated under IAS 39. The fourth quarter provision for credit losses as a percentage of average loans is 19 basis points, consisting of 18 basis points related to impaired loans and one basis point related to performing loans.
This compares to 19 basis points in the third quarter, consisting of 22 basis points related to impaired loans and a reduction of three basis points related to performing loans. Under IAS 39, provisions for credit losses represented 19 basis points in the fourth quarter last year with the amount entirely related to impaired loans.
Under IFRS 9, the annual provision for credit losses as a percentage of average loans of 21 basis points related entirely to impaired loans. This compares to 20 basis points last year under IAS 39, consisting of 19 basis points related to impaired loans and one basis point related to performing loans.
Deposits and Funding
We continue to execute on key strategic objectives to grow and diversify funding sources. Total deposits of
Total deposits were up 2% (
Total deposits by type and source are summarized below:
As at | Change from 2018 | |||||||
(unaudited) |
|
| October 31 2018 | |||||
($ millions) | ||||||||
Deposits by source and type | ||||||||
Demand and notice | $ | 8,623 | $ | 7,937 | $ | 7,594 | 14 | % |
Term | 5,194 | 5,141 | 4,732 | 10 | ||||
13,817 | 13,078 | 12,326 | 12 | |||||
Broker term | 8,215 | 8,794 | 8,368 | (2) | ||||
Capital markets | 3,319 | 2,951 | 3,006 | 10 | ||||
Total Deposits | $ | 25,351 | $ | 24,823 | $ | 23,700 | 7 | % |
Personal deposits represented 60% of total deposits at
Securitization
Securitized leases, loans and mortgages are reported on-balance sheet with total loans. The outstanding balance of securitized leases and loans at
Capital Management
OSFI requires Canadian financial institutions to manage and report regulatory capital in accordance with the Basel III capital management framework. We currently report regulatory capital ratios using the Standardized approach for calculating risk-weighted assets, which requires CWB to carry significantly more capital for certain credit exposures compared to requirements under the AIRB methodology. For this reason, regulatory capital ratios of banks that utilize the Standardized approach are not directly comparable with the large Canadian banks and other financial institutions that utilize the AIRB methodology. Our required minimum regulatory capital ratios, including a 250 basis point capital conservation buffer, are 7.0% common equity Tier 1 (CET1), 8.5% Tier 1 and 10.5% Total capital.
With very strong capital ratios of 9.1% CET1, 10.7% Tier 1 and 12.8% Total capital at
In fiscal 2019, we issued five year rate reset non-viability contingent capital (NVCC) First Preferred Shares Series 9 for gross proceeds of
Further details regarding our regulatory capital and capital adequacy ratios are included in the following table:
As at
|
As at 2019 |
As at 2018 | |||||||
(unaudited) ($ millions) | |||||||||
Regulatory capital | |||||||||
CET1 capital before deductions | $ | 2,533 | $ | 2,487 | $ | 2,369 | |||
Net CET1 deductions | (230) | (225) | (216) | ||||||
CET1 capital | 2,303 | 2,262 | 2,153 | ||||||
Tier 1 capital | 2,693 | 2,652 | 2,418 | ||||||
Total capital(1) | 3,233 | 3,192 | 2,788 | ||||||
Risk-weighted assets | $ | 25,202 | $ | 25,020 | $ | 23,486 | |||
Capital adequacy ratios | |||||||||
CET1 | 9.1 | % | 9.0 | % | 9.2 | % | |||
Tier 1 | 10.7 | 10.6 | 10.3 | ||||||
Total | 12.8 | 12.8 | 11.9 | ||||||
Leverage | 8.3 | 8.3 | 8.0 |
(1) | The 2019 inclusion of non-common equity instruments that do not include NVCC clauses is capped at 30% of the |
Dividends
We evaluate common share dividends every quarter against the current strength of our capital position and capital requirements under the Standardized approach to support ongoing strong and balanced asset growth. On
Dividend Reinvestment Plan
CWB common shares (TSX: CWB) and preferred shares (TSX: CWB.PR.B; CWB.PR.C; CWB.PR.D) are deemed eligible by CWB to participate in CWB's dividend reinvestment plan (the Plan). The Plan provides holders of eligible shares of CWB the opportunity to direct cash dividends toward the purchase of CWB common shares. Further details for the Plan are available on our website.
Non-IFRS Measures
CWB uses a number of financial measures to assess its performance against strategic initiatives and operational benchmarks. Non-IFRS measures provide readers with an enhanced understanding of how management views CWB's ongoing operating performance. These measures may also provide readers with the ability to analyze trends related to profitability and effectiveness of CWB's operations and strategies, and determine compliance against regulatory standards. To arrive at certain non-IFRS measures, CWB makes adjustments to the reported results. Adjustments relate to items which management believes are not indicative of underlying operating performance. CWB believes that adjusted results provide the reader with a better understanding of how management views its 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 below);
- adjusted common shareholders' net income – total common shareholders' net income, excluding the amortization of acquisition-related intangible assets and contingent consideration fair value changes, net of tax (see calculation below);
- pre-tax, pre-provision income – total revenue less adjusted non-interest expenses (see calculation below);
- 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 FVOCI and other financial assets are excluded;
- provision for credit losses on impaired loans as a percentage of total 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 – 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 and Total capital ratios – calculated in accordance with guidelines issued by 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; and
- average balances – average daily balances.
Adjusted Financial Measures | |||||||||||||||
For the three months ended |
Change from 2018 | For the year ended | Change from 2018 | ||||||||||||
(unaudited) ($ thousands) | October 31 | July 31 |
| 2019 | October 31 | ||||||||||
Non-interest expenses | $ | 107,667 | $ | 102,759 | $ | 98,751 | 9 | % | $ | 405,481 | $ | 373,483 | 9 | % | |
Adjustments (before tax): | |||||||||||||||
Amortization of acquisition-related | |||||||||||||||
intangible assets | (1,204) | (1,250) | (1,367) | (12) | (5,007) | (6,313) | (21) | ||||||||
Adjusted non-interest expenses | $ | 106,463 | $ | 101,509 | $ | 97,384 | 9 | % | $ | 400,474 | $ | 367,170 | 9 | % | |
Common shareholders' net income | $ | 67,512 | $ | 70,964 | $ | 64,501 | 5 | % | $ | 266,940 | $ | 249,256 | 7 | % | |
Adjustments (after-tax): | |||||||||||||||
Acquisition-related fair value changes | - | - | 3,705 | (100) | 5,773 | 14,769 | (61) | ||||||||
Amortization of acquisition-related | |||||||||||||||
intangible assets | 904 | 607 | 1,005 | (10) | 3,397 | 4,695 | (28) | ||||||||
Adjusted common shareholders' net income | $ | 68,416 | $ | 71,571 | $ | 69,211 | (1) | % | $ | 276,110 | $ | 268,720 | 3 | % | |
Pre-tax, pre-provision income | |||||||||||||||
For the three months ended | Change from | For the year ended |
Change from 2018 | ||||||||||||
(unaudited) ($ thousands) | October 31 | July 31 |
|
| October 31 | ||||||||||
Total revenue | $ | 220,853 | $ | 218,484 | $ | 208,566 | 6 | % | $ | 861,604 | $ | 803,358 | 7 | % | |
Less: | |||||||||||||||
Adjusted non-interest expenses (see | |||||||||||||||
above) | 106,463 | 101,509 | 97,384 | 9 | 400,474 | 367,170 | 9 | ||||||||
Pre-tax, pre-provision income | $ | 114,390 | $ | 116,975 | $ | 111,182 | 3 | % | $ | 461,130 | $ | 436,188 | 6 | % |
Consolidated Balance Sheets
As at 2019(1) | As at 2019(1) | As at | Change from 2018 | |||||
(unaudited) | ||||||||
($ thousands) | ||||||||
Assets | ||||||||
Cash Resources | ||||||||
Cash and non-interest bearing deposits with financial institutions | $ | 116,963 | $ | 154,019 | $ | 73,822 | 58, | % |
Interest bearing deposits with regulated financial institutions | 293,856 | 269,523 | 26,825 | 995 | ||||
Cheques and other items in transit | 5,023 | 3,778 | 52,574 | (90) | ||||
415,842 | 427,320 | 153,221 | 171 | |||||
Securities | ||||||||
Issued or guaranteed by | 1,341,326 | 853,543 | 1,325,816 | 1 | ||||
Issued or guaranteed by a province or municipality | 468,671 | 741,370 | 521,825 | (10) | ||||
Other debt securities | 191,046 | 148,547 | 143,536 | 33 | ||||
Preferred shares | 18,164 | 38,268 | 93,575 | (81) | ||||
2,019,207 | 1,781,728 | 2,084,752 | (3) | |||||
Securities Purchased under Resale Agreements | 40,366 | 26,283 | - | 100 | ||||
Loans | ||||||||
Personal | 5,689,833 | 5,591,170 | 5,247,160 | 8 | ||||
Business | 22,786,894 | 22,649,516 | 21,085,968 | 8 | ||||
28,476,727 | 28,240,686 | 26,333,128 | 8 | |||||
Allowance for credit losses | (110,834) | (105,372) | (128,529) | (14) | ||||
28,365,893 | 28,135,314 | 26,204,599 | 8 | |||||
Other | ||||||||
Property and equipment | 63,166 | 58,402 | 59,098 | 7 | ||||
85,392 | 85,392 | 85,168 | - | |||||
Intangible assets | 173,748 | 166,031 | 160,790 | 8 | ||||
Derivatives | 47,815 | 50,850 | 2,496 | nm | ||||
Other assets | 212,806 | 199,671 | 271,339 | (22) | ||||
582,927 | 560,346 | 578,891 | 1 | |||||
Total Assets | $ | 31,424,235 | $ | 30,930,991 | $ | 29,021,463 | 8 | % |
Liabilities and Equity | ||||||||
Deposits | ||||||||
Personal | $ | 15,300,505 | $ | 15,457,178 | $ | 14,483,686 | 6 | % |
Business and government | 10,050,856 | 9,365,422 | 9,216,271 | 9 | ||||
25,351,361 | 24,822,600 | 23,699,957 | 7 | |||||
Other | ||||||||
Cheques and other items in transit | 22,532 | 26,538 | 28,489 | (21) | ||||
Securities sold under repurchase agreements | 29,965 | 138,211 | 95,126 | (68) | ||||
Derivatives | 14,016 | 12,623 | 69,581 | (80) | ||||
Other liabilities | 646,386 | 627,440 | 531,953 | 22 | ||||
712,899 | 804,812 | 725,149 | (2) | |||||
Debt | ||||||||
Debt related to securitization activities | 1,913,799 | 1,900,101 | 1,757,854 | 9 | ||||
Subordinated debentures | 498,494 | 498,447 | 250,000 | 99 | ||||
2,412,293 | 2,398,548 | 2,007,854 | 20 | |||||
Equity | ||||||||
Preferred shares | 390,000 | 390,000 | 265,000 | 47 | ||||
Common shares | 731,970 | 731,288 | 744,701 | (2) | ||||
Retained earnings | 1,785,273 | 1,750,594 | 1,649,196 | 8 | ||||
Share-based payment reserve | 24,309 | 24,602 | 23,937 | 2 | ||||
Accumulated other comprehensive income | 14,258 | 6,738 | (97,082) | nm | ||||
Total Shareholders' Equity | 2,945,810 | 2,903,222 | 2,585,752 | 14 | ||||
Non-controlling interests | 1,872 | 1,809 | 2,751 | (32) | ||||
Total Equity | 2,947,682 | 2,905,031 | 2,588,503 | 14 | ||||
Total Liabilities and Equity | $ | 31,424,235 | $ | 30,930,991 | $ | 29,021,463 | 8 | % |
(1) | Amounts for fiscal 2019 have been prepared in accordance with IFRS 9Financial Instruments (IFRS 9). Fiscal 2018 comparatives have been prepared in accordance with IAS |
nm – | not meaningful |
Consolidated Statements of Income
For the three months ended | Change from 2018 | For the year ended | Change from | |||||||||||||||||
(unaudited) |
|
|
|
|
| |||||||||||||||
($ thousands, except per share amounts) | ||||||||||||||||||||
Interest Income | ||||||||||||||||||||
Loans | $ | 356,819 | $ | 352,272 | $ | 319,310 | 12 | % | $ | 1,379,730 | $ | 1,185,530 | 16 | % | ||||||
Securities | 8,656 | 7,307 | 8,075 | 7 | 30,696 | 35,529 | (14) | |||||||||||||
Deposits with regulated | ||||||||||||||||||||
financial institutions | 2,380 | 2,111 | 1,095 | 117 | 8,274 | 4,236 | 95 | |||||||||||||
367,855 | 361,690 | 328,480 | 12 | 1,418,700 | 1,225,295 | 16 | ||||||||||||||
Interest Expense | ||||||||||||||||||||
Deposits | 149,628 | 146,583 | 125,779 | 19 | 573,479 | 452,526 | 27 | |||||||||||||
Debt | 16,788 | 15,361 | 13,608 | 23 | 59,637 | 47,779 | 25 | |||||||||||||
166,416 | 161,944 | 139,387 | 19 | 633,116 | 500,305 | 27 | ||||||||||||||
Net Interest Income | 201,439 | 199,746 | 189,093 | 7 | 785,584 | 724,990 | 8 | |||||||||||||
Non-interest Income | ||||||||||||||||||||
Credit related | 9,480 | 8,290 | 8,456 | 12 | 34,082 | 32,165 | 6 | |||||||||||||
Wealth management services | 5,056 | 4,811 | 5,119 | (1) | 19,640 | 20,371 | (4) | |||||||||||||
Retail services | 2,566 | 2,714 | 2,588 | (1) | 10,627 | 10,334 | 3 | |||||||||||||
Trust services | 1,908 | 1,974 | 1,919 | (1) | 7,651 | 7,784 | (2) | |||||||||||||
Gains (losses) on securities, net | 2 | 5 | 1 | 100 | 301 | (217) | nm | |||||||||||||
Other | 402 | 944 | 1,390 | (71) | 3,719 | 7,931 | (53) | |||||||||||||
19,414 | 18,738 | 19,473 | - | 76,020 | 78,368 | (3) | ||||||||||||||
Total Revenue | 220,853 | 218,484 | 208,566 | 6 | 861,604 | 803,358 | 7 | |||||||||||||
Provision for Credit Losses | 13,267 | 13,110 | 12,432 | 7 | 57,758 | 48,257 | 20 | |||||||||||||
Acquisition-related Fair Value Changes | - | - | 5,041 | (100) | 7,854 | 20,094 | (61) | |||||||||||||
Non-interest Expenses | ||||||||||||||||||||
Salaries and employee benefits | 65,495 | 65,857 | 59,549 | 10 | 257,966 | 237,228 | 9 | |||||||||||||
Premises and equipment | 18,496 | 17,323 | 16,474 | 12 | 70,515 | 62,754 | 12 | |||||||||||||
Other expenses | 23,676 | 19,579 | 22,728 | 4 | 77,000 | 73,501 | 5 | |||||||||||||
107,667 | 102,759 | 98,751 | 9 | 405,481 | 373,483 | 9 | ||||||||||||||
Net Income before Income Taxes | 99,919 | 102,615 | 92,342 | 8 | 390,511 | 361,524 | 8 | |||||||||||||
Income taxes | 26,691 | 25,992 | 23,919 | 12 | 102,665 | 96,877 | 6 | |||||||||||||
Net Income | 73,228 | 76,623 | 68,423 | 7 | 287,846 | 264,647 | 9 | |||||||||||||
Net income attributable to | ||||||||||||||||||||
non-controlling interests | 310 | 252 | 360 | (14) | 1,052 | 1,141 | (8) | |||||||||||||
Shareholders' Net Income | 72,918 | 76,371 | 68,063 | 7 | 286,794 | 263,506 | 9 | |||||||||||||
Preferred share dividends | 5,406 | 5,407 | 3,562 | 52 | 19,854 | 14,250 | 39 | |||||||||||||
Common Shareholders' Net Income | $ | 67,512 | $ | 70,964 | $ | 64,501 | 5 | % | $ | 266,940 | $ | 249,256 | 7 | % | ||||||
Average number of common | ||||||||||||||||||||
shares (in thousands) | 87,219 | 87,217 | 88,933 | (2) | % | 87,513 | 88,806 | (1) | % | |||||||||||
Average number of diluted common | ||||||||||||||||||||
shares (in thousands) | 87,452 | 87,394 | 89,267 | (2) | 87,739 | 89,285 | (2) | |||||||||||||
Earnings Per Common Share | ||||||||||||||||||||
Basic | $ | 0.77 | $ | 0.81 | $ | 0.73 | 5 | % | $ | 3.05 | $ | 2.81 | 9 | % | ||||||
Diluted | 0.77 | 0.81 | 0.73 | 7 | 3.04 | 2.79 | 9 |
(1) | Amounts for fiscal 2019 have been prepared in accordance with IFRS 9. Fiscal 2018 comparatives have been prepared in accordance with IAS 39 and have not been |
nm – | not meaningful |
Consolidated Statements of Comprehensive Income
For the three months ended | For the year ended | ||||||||||||
(unaudited) ($ thousands) |
| 2018 |
| 2018 | |||||||||
Net Income | $ | 73,228 | $ | 68,423 | $ | 287,846 | $ | 264,647 | |||||
Other Comprehensive Income (Loss), net of tax | |||||||||||||
Items that will be subsequently reclassified to net income | |||||||||||||
Debt securities measured at fair value through other comprehensive income | |||||||||||||
(2018: Available-for-sale debt and equity securities) | |||||||||||||
Gains (losses) from change in fair value(2) | 4,063 | (7,095) | 34,301 | (19,945) | |||||||||
Reclassification to net income(3) | (33) | (1) | (354) | 158 | |||||||||
4,030 | (7,096) | 33,947 | (19,787) | ||||||||||
Derivatives designated as cash flow hedges | |||||||||||||
Gains (losses) from change in fair value(4) | (2,978) | (16,204) | 71,361 | (26,848) | |||||||||
Reclassification to net income(5) | (559) | 1,272 | (383) | (994) | |||||||||
(3,537) | (14,932) | 70,978 | (27,842) | ||||||||||
Items that will not be subsequently reclassified to net income | |||||||||||||
Losses on equity securities designated at fair value through other comprehensive income(6) | (1,383) | n/a | (14,175) | n/a | |||||||||
(890) | (22,028) | 90,750 | (47,629) | ||||||||||
Comprehensive Income for the Period | $ | 72,338 | $ | 46,395 | $ | 378,596 | $ | 217,018 | |||||
Comprehensive income for the period attributable to: | |||||||||||||
Shareholders | $ | 72,028 | $ | 46,035 | $ | 377,544 | $ | 215,877 | |||||
Non-controlling interests | 310 | 360 | 1,052 | 1,141 | |||||||||
Comprehensive Income for the Period | $ | 72,338 | $ | 46,395 | $ | 378,596 | $ | 217,018 | |||||
(1) | Amounts for fiscal 2019 have been prepared in accordance with IFRS 9. Fiscal 2018 comparatives have been prepared in accordance with IAS 39 and have not been restated |
(2) | Net of income tax of |
(3) | Net of income tax of |
(4) | Net of income tax of |
(5) | Net of income tax of |
(6) | Net of income tax of |
n/a – | not applicable |
Consolidated Statements of Changes in Equity
For the year ended | ||||
(unaudited) | October 31 |
| ||
($ thousands) | ||||
Preferred Shares | ||||
Balance at beginning of period | $ | 265,000 | $ | 265,000 |
Issued | 125,000 | - | ||
Balance at end of period | 390,000 | 265,000 | ||
Common Shares | ||||
Balance at beginning of period | 744,701 | 731,885 | ||
Purchased for cancellation | (15,326) | - | ||
Issued under dividend reinvestment plan | 1,320 | 4,248 | ||
Transferred from share-based payment reserve on the exercise or exchange of options | 1,245 | 2,818 | ||
Issued on acquisition-related contingent consideration instalment payment | - | 5,750 | ||
Balance at end of period | 731,970 | 744,701 | ||
Retained Earnings | ||||
Balance at beginning of period under IAS 39 | 1,649,196 | 1,488,634 | ||
Impact of adopting IFRS 9 on | 22,514 | n/a | ||
Balance at beginning of period under IFRS 9 | 1,617,710 | n/a | ||
Shareholders' net income | 286,794 | 263,506 | ||
Dividends – Preferred shares | (19,854) | (14,250) | ||
– Common shares | (94,573) | (88,819) | ||
Net premium on common shares purchased for cancellation | (34,266) | - | ||
Realized losses reclassified from accumulated other comprehensive income | (20,370) | n/a | ||
Issuance costs on preferred shares | (3,007) | - | ||
Increase (decrease) attributable to non-controlling interests ownership change | (1,161) | 125 | ||
Balance at end of period | 1,785,273 | 1,649,196 | ||
Share-based Payment Reserve | ||||
Balance at beginning of period | 23,937 | 24,979 | ||
Amortization of fair value of options | 1,617 | 1,776 | ||
Transferred to common shares on the exercise or exchange of options | (1,245) | (2,818) | ||
Balance at end of period | 24,309 | 23,937 | ||
Accumulated Other Comprehensive Income | ||||
Debt securities measured at fair value through other comprehensive income (2018: Available-for-sale debt and equity securities) | ||||
Balance at beginning of period under IAS 39 | (48,962) | (29,175) | ||
Impact of adopting IFRS 9 on | 12,994 | n/a | ||
Balance at beginning of period under IFRS 9 | (35,968) | n/a | ||
Other comprehensive income (loss) | 33,947 | (19,787) | ||
Balance at end of period | (2,021) | (48,962) | ||
Derivatives designated as cash flow hedges | ||||
Balance at beginning of period | (48,120) | (20,278) | ||
Other comprehensive income (loss) | 70,978 | (27,842) | ||
Balance at end of period | 22,858 | (48,120) | ||
Equity securities designated at fair value through other comprehensive income | ||||
Impact of adopting IFRS 9 on | (12,774) | n/a | ||
Balance at beginning of period under IFRS 9 | (12,774) | n/a | ||
Other comprehensive loss | (14,175) | n/a | ||
Realized losses reclassified to retained earnings | 20,370 | n/a | ||
Balance at end of period | (6,579) | n/a | ||
Total Accumulated Other Comprehensive Income (Loss) | 14,258 | (97,082) | ||
Total Shareholders' Equity | 2,945,810 | 2,585,752 | ||
Non-Controlling Interests | ||||
Balance at beginning of period | 2,751 | 2,797 | ||
Net income attributable to non-controlling interests | 1,052 | 1,141 | ||
Dividends to non-controlling interests | (1,071) | (1,431) | ||
Partial ownership increase (decrease) | (860) | 244 | ||
Balance at end of period | 1,872 | 2,636 | ||
Total Equity | $ | 2,947,682 | $ | 2,588,503 |
(1) | Amounts for fiscal 2019 have been prepared in accordance with IFRS 9. Fiscal 2018 comparatives have been prepared in accordance with IAS 39 and have not been |
n/a – | not applicable |
Consolidated Statements of Cash Flows
For the year ended | ||||
(unaudited) |
|
| ||
($ thousands) | ||||
Cash Flows from Operating Activities | ||||
Net income | $ | 287,846 | $ | 264,647 |
Adjustments to determine net cash flows: | ||||
Provision for credit losses | 57,758 | 48,257 | ||
Current income taxes receivable and payable, net | 56,162 | (3,456) | ||
Accrued interest receivable and payable, net | 41,672 | 28,415 | ||
Depreciation and amortization | 32,444 | 29,708 | ||
Fair value change in contingent consideration | 7,854 | 20,094 | ||
Amortization of fair value of employee stock options | 1,617 | 1,776 | ||
Deferred income taxes, net | (1,433) | (7,677) | ||
(Gains) losses on securities, net | (301) | 217 | ||
Net gain on CWT strategic transactions | - | (4,030) | ||
Change in operating assets and liabilities: | ||||
Deposits, net | 1,651,404 | 1,796,975 | ||
Loans, net | (2,202,000) | (3,024,939) | ||
Securities sold under repurchase agreements, net | (65,161) | 36,768 | ||
Securities purchased under resale agreements, net | (40,366) | - | ||
Debt related to securitization activities, net | 155,945 | 531,518 | ||
Other items, net | 36,547 | 17,436 | ||
19,988 | (264,291) | |||
Cash Flows from Financing Activities | ||||
Debentures issued, net of issuance costs | 248,447 | - | ||
Preferred shares issued, net of issuance costs | 121,993 | - | ||
Dividends | (113,077) | (98,821) | ||
Common shares purchased for cancellation | (49,592) | - | ||
Purchases from non-controlling interests | (2,708) | - | ||
Dividends to non-controlling interests | (1,071) | (1,431) | ||
Contributions by non-controlling interests | 459 | 1,316 | ||
204,451 | (98,936) | |||
Cash Flows from Investing Activities | ||||
Interest bearing deposits with regulated financial institutions, net | (267,031) | 477,070 | ||
Securities, purchased | (5,543,483) | (2,892,129) | ||
Securities, sale proceeds | 2,454,694 | 1,266,827 | ||
Securities, matured | 3,219,365 | 1,704,328 | ||
Property, equipment and intangible assets | (49,069) | (44,203) | ||
Acquisition-related contingent consideration payments | (37,368) | (17,250) | ||
Proceeds from CWT strategic transactions | - | 4,135 | ||
(222,892) | 498,778 | |||
Change in Cash and Cash Equivalents | 1,547 | 135,551 | ||
Cash and Cash Equivalents at Beginning of Period | 97,907 | (37,644) | ||
Cash and Cash Equivalents at End of Period * | $ | 99,454 | $ | 97,907 |
* Represented by: | ||||
Cash and non-interest bearing deposits with financial institutions | $ | 116,963 | $ | 73,822 |
Cheques and other items in transit (included in Cash Resources) | 5,023 | 52,574 | ||
Cheques and other items in transit (included in Other Liabilities) | (22,532) | (28,489) | ||
Cash and Cash Equivalents at End of Period | $ | 99,454 | $ | 97,907 |
Supplemental Disclosure of Cash Flow Information | ||||
Interest and dividends received | $ | 1,428,117 | $ | 1,237,809 |
Interest paid | 588,740 | 462,691 | ||
Income taxes paid | 80,566 | 88,116 |
(1) | Amounts for fiscal 2019 have been prepared in accordance with IFRS 9. Fiscal 2018 comparatives have been prepared in accordance with IAS 39 and have not |
(2) | During fiscal 2019, cash flows from debt related to securitization activities, net was reclassified from Financing Activities to Operating Activities. Comparative |
SOURCE
© Canada Newswire, source