This news release and
accompanying financial highlights are supplementary to CWB's 2023
First Quarter Report to Shareholders and 2022 Annual Report and
should be read in conjunction with those documents.
|
EDMONTON, AB, March 2,
2023 /CNW/ - CWB Financial Group (TSX: CWB)
(CWB) announced financial performance for the three months ended
January 31, 2023, with quarterly
common shareholders' net income of $94
million, up 39% sequentially and 8% from the same period
last year. Adjusted EPS(1) of $1.02 was up 16% from last quarter, as the impact
of lower foreign exchange revenue compared to elevated levels last
quarter was more than offset by a reduction in the provision for
credit losses. The reduction in the provision for credit losses
primarily related to the reversal of a previously recognized
impaired loan write-off, which more than offset net new impaired
loan provisions for credit losses. Our Board of Directors declared
a cash dividend of $0.32 per common
share, consistent with the dividend declared last quarter and up
two cents, or 7%, from last year.
"Execution of our winning strategy and demonstrated history of
earning new relationships through economic cycles supports our
expectation that we will deliver strong full-service growth this
year," said Chris Fowler, President,
and CEO. "Our teams delivered strategically targeted loan growth
this quarter, with very strong increases in Ontario and in general commercial loans, which
represent our largest opportunity to convert clients into
full-service relationships."
"Gross impaired loans are returning to more normal levels from
very benign conditions last year. Our secured lending model and
disciplined underwriting processes continue to support our
expectation that our provision for credit losses will remain within
our strong historical range."
"We are focused on the significant opportunities ahead of us and
expect momentum to build through the year as we execute against our
strategic priorities and initiatives to support revenue growth
while we proactively manage our expenses to drive profitability in
line with our full year targets."
|
|
(1)
|
Non-GAAP measure –
refer to definitions and detail provided on page 5.
|
Financial Performance
Q1 2023,
compared to
Q4 2022(1)
|
Common shareholders'
net income
|
$94 million
|
Up 39%
|
Diluted EPS
Adjusted EPS
|
$0.99
$1.02
|
Up 38%
Up 16%
|
Adjusted Return on
Equity (ROE)
|
12.0 %
|
Up 150 bp
|
Efficiency
ratio
|
52.7 %
|
Up 10 bp
|
Compared to the prior quarter, common shareholders' net income
increased as the beneficial impact of a 23 basis point decrease in
the total provision for credit losses as a percentage of average
loans(1) and lower non-interest expenses more than
offset a 2% decline in revenue. Pre-tax, pre-provision
income(1) decreased 3%.
Lower revenue reflected a 23% decline in non-interest income, as
we recognized elevated foreign exchange gains in the prior quarter,
partially offset by a 1% increase in net interest income. Higher
net interest income was driven by 1% sequential loan growth,
partially offset by a one basis point decrease in net interest
margin(1). Net interest margin was lower as the net
positive impact of rising Bank of Canada policy interest rates on our floating
rate loans and deposits was more than offset by the growth in fixed
rate deposit costs, which have continued to outpace fixed term
asset yields. Our fixed term deposit portfolio has repriced faster
to reflect higher market interest rates than our fixed term loans,
which have a longer average duration. Loan yields have also been
slower to reflect the changes in market interest rates due to high
competition for new lending, and loan related fees, including
payout penalties, are lower compared to last quarter. The decline
in net interest margin was partially offset by a three basis point
impact from the interest income recovery from a previously impaired
loan.
Non-interest expenses were down 12%, primarily due to
accelerated amortization of previously capitalized Advanced
Internal Ratings Based (AIRB) assets recognized in the prior
quarter. Adjusted non-interest expenses(1) were down
2%.
The provision for credit losses on total loans as a percentage
of average loans(1) represented a nine basis point
recovery this quarter and was 23 basis points lower than last
quarter. A 12 basis point impaired loan recovery, compared to a nil
provision last quarter, primarily due to the reversal of a
previously recognized impaired loan write-off, which more than
offset net new impaired loan provisions for credit losses required
this quarter. The performing loan provision of three basis points
was 11 basis points lower than last quarter.
Q1 2023,
compared to
Q1 2022(1)
|
Common shareholders'
net income
|
$94 million
|
Up 8%
|
Diluted EPS
Adjusted EPS
|
$0.99
$1.02
|
Up 2%
Up 3%
|
Adjusted Return on
Equity (ROE)
|
12.0 %
|
Up 20 bp
|
Efficiency
ratio
|
52.7 %
|
Up 420 bp
|
|
|
(1)
|
Adjusted EPS, adjusted
ROE, efficiency ratio, pre-tax, pre-provision income, net interest
margin, adjusted non-interest expenses and the provision for credit
losses on total loans as a percentage of average loans are non-GAAP
measures. Refer to definitions and detail provided on page
5.
|
|
bp – basis
point
|
Common shareholders' net income increased compared to the same
quarter last year as a 20 basis point decline in the total
provision for credit losses and 3% growth in revenue more than
offset higher non-interest expenses. Pre-tax, pre-provision income
decreased 6%.
Higher revenue reflected a 4% increase in net interest income,
partially offset by a 7% decline in non-interest income. The
increase in net interest income reflected the benefit of 9% annual
loan growth, partially offset by a 15 basis point decrease in net
interest margin. The decline in net interest margin reflects the
impact of lower loan related fees, including payout penalties, a
proportional shift in our funding mix towards fixed term
branch-raised and insured broker deposits and asset yields that
have lagged the growth of deposit costs through the rising interest
rate environment. The decline in net interest margin was partially
offset by the net positive impact of rising Bank of Canada policy interest rates on our floating
rate loans and deposits and a three basis point impact from the
interest income recovery from a previously impaired loan.
Non-interest expenses were up 12% from the prior year, primarily
driven by higher people costs related to the impact of salary
increments enacted in the prior year and a higher staffing
complement, including in the Ontario market to support our continued
expansion. Higher non-interest expenses also reflect an expansion
of our digital capabilities as we optimize our business, deliver an
unrivaled experience to our clients and accelerate full-service
client growth.
The provision for credit losses on total loans as a percentage
of average loans was 20 basis points lower than the same quarter
last year, which reflected a 24 basis point decrease in the
impaired loan provision, partially offset by a four basis point
increase in the performing loan provision. We recorded a recovery
in the performing loan provision last year, reflective of an
improvement in forecast economic conditions at that point in
time.
Financial Scorecard
The targets below reflect key financial objectives we expect to
drive on an annual basis over the next two fiscal years, and have
been developed on the assumption of relatively stable economic
conditions and under the Standardized approach for capital
management.
Annual
Metrics
|
Performance
Target
|
Pre-tax pre-provision
income growth
|
Greater than
10%
|
Adjusted ROE
|
12% by 2024
|
Efficiency
ratio
|
Less than
50%
|
About CWB Financial Group
CWB Financial Group (CWB) is the only full-service bank in
Canada with a strategic focus to
meet the unique financial needs of businesses and their owners. We
provide our nation-wide clients with full-service business and
personal banking, specialized financing, comprehensive wealth
management offerings, and trust services. Clients choose CWB for a
differentiated level of service through specialized expertise,
customized solutions, and faster response times relative to the
competition. Our people take the time to understand our clients and
their business, and work as a united team to provide holistic
solutions and advice.
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) and "CWB.PR.D" (Series 9 preferred shares). We
are firmly committed to the responsible creation of value for all
our stakeholders and our approach to sustainability will support
our continued success. Learn more at www.cwb.com.
Fiscal 2023 First Quarter Results Conference Call
CWB's first quarter results conference call is scheduled for
Thursday, March 2, 2023, 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 (416) 764-8688 (Toronto)
or 1 (888) 390-0546 (toll-free) and entering passcode: 83287796.
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 9, 2023 by dialing (416)
764-8677 (Toronto) or 1 (888)
390-0541 (toll-free) and entering passcode: 287796#.
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 media 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
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 AIRB
approach for regulatory capital purposes, 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 2022 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 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. 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-GAAP Measures
We use a number of financial measures and ratios to assess our
performance against strategic initiatives and operational
benchmarks. Some of these financial measures and ratios do not have
standardized meanings prescribed by Generally Accepted Accounting
Principles (GAAP) and may not be comparable to similar measures
presented by other financial institutions. Non-GAAP financial
measures and ratios provide readers with an enhanced understanding
of how we view our financial performance. These measures and ratios
may also provide the ability to analyze trends related to
profitability and the effectiveness of our operations and
strategies, and are disclosed in compliance with National
Instrument 52-112 Non-GAAP and Other Financial Measures
Disclosure.
To calculate non-GAAP financial measures,
we exclude certain items from our financial results
prepared in accordance with IFRS. Adjustments relate to items which
we believe are not indicative of underlying operating
performance. Our non-GAAP financial measures include:
- Adjusted non-interest expenses – total non-interest expenses,
excluding pre-tax accelerated amortization of previously
capitalized AIRB assets, amortization of acquisition-related
intangible assets, and acquisition and integration costs.
Accelerated amortization of AIRB assets is a result of a reduction
in estimated useful lives of certain previously capitalized AIRB
assets recognized in the three months ended October 31, 2022. Acquisition and integration
costs include direct and incremental costs incurred as part of the
execution and integration of business acquisitions.
- Adjusted common shareholders' net income – total common
shareholders' net income, excluding the accelerated amortization of
previously capitalized AIRB assets, amortization of
acquisition-related intangible assets, and acquisition and
integration costs, net of tax.
- Pre-tax, pre-provision income – total revenue less adjusted
non-interest expenses.
The following table provides a reconciliation of our non-GAAP
financial measures to our reported financial results.
|
|
For the three months
ended
|
|
Change from
January 31
2022
|
|
(unaudited)
(thousands)
|
|
|
January 31
2023
|
|
|
October 31
2022
|
|
|
January 31
2022
|
|
|
Non-interest
expenses
|
|
$
|
147,217
|
|
$
|
166,783
|
|
$
|
131,407
|
|
12
|
%
|
Adjustments (before
tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquisition-related intangible assets
|
|
|
(2,981)
|
|
|
(2,557)
|
|
|
(2,541)
|
|
17
|
|
Acquisition and
integration costs
|
|
|
(375)
|
|
|
(361)
|
|
|
-
|
|
100
|
|
Accelerated
amortization of previously capitalized AIRB assets
|
|
|
-
|
|
|
(16,555)
|
|
|
-
|
|
-
|
|
Adjusted
non-interest expenses
|
|
$
|
143,861
|
|
$
|
147,310
|
|
$
|
128,866
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%
|
Common shareholders'
net income adjustments (after-tax):
|
|
$
|
94,363
|
|
$
|
67,687
|
|
$
|
87,642
|
|
8
|
|
Amortization of
acquisition-related intangible assets(1)
|
|
|
2,446
|
|
|
1,913
|
|
|
1,901
|
|
29
|
|
Acquisition and
integration costs(2)
|
|
|
281
|
|
|
270
|
|
|
-
|
|
100
|
|
Accelerated
amortization of previously capitalized AIRB
assets(3)
|
|
|
-
|
|
|
12,549
|
|
|
-
|
|
-
|
|
Adjusted common
shareholders' net income
|
|
$
|
97,090
|
|
$
|
82,419
|
|
$
|
89,543
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
$
|
272,891
|
|
$
|
279,838
|
|
$
|
265,976
|
|
3
|
%
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
non-interest expenses (see above)
|
|
|
143,861
|
|
|
147,310
|
|
|
128,866
|
|
12
|
%
|
Pre-tax,
pre-provision income
|
|
$
|
129,030
|
|
$
|
132,528
|
|
$
|
137,110
|
|
(6)
|
|
|
|
(1)
|
Net of income tax of
$535 for the three months ended January 31, 2023 (Q4 2022 – $644,
Q1 2022 – $640).
|
(2)
|
Net of income tax of
$94 for the three months ended January 31, 2023 (Q4 2022 – $91, Q1
2022 – $nil).
|
(3)
|
Net of income tax of
$nil for the three months ended January 31, 2023 (Q4 2022 – $4,006,
Q1 2022 – $nil).
|
Non-GAAP ratios are calculated using the non-GAAP financial
measures defined above. Our non-GAAP ratios include:
- Adjusted earnings per common share – diluted earnings per
common share calculated with adjusted common shareholders' net
income.
- Adjusted return on common shareholders' equity – annualized
adjusted common shareholders' net income divided by average common
shareholders' equity, which is total shareholders' equity excluding
preferred shares and limited recourse capital notes.
- Efficiency ratio – adjusted non-interest expenses divided by
total revenue.
- Operating leverage – growth rate of total revenue less growth
rate of adjusted non-interest expenses.
Supplementary financial measures are measures that do not have
definitions prescribed by GAAP, but do not meet the definition of a
non-GAAP financial measure or ratio. Our supplementary
financial measures include:
- Return on assets – annualized common shareholders' net income
divided by average total assets.
- Net interest margin – annualized net interest income divided by
average total assets.
- Return on common shareholders' equity – annualized common
shareholders' net income divided by average common shareholders'
equity.
- Write-offs as a percentage of average loans – annualized
write-offs divided by average total loans.
- Book value per common share – total common shareholders' equity
divided by total common shares outstanding.
- Branch-raised deposits – total deposits excluding broker term
and capital market deposits.
- 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.
- Average balances – average daily balances.
Selected Financial Highlights
|
|
For the three months
ended
|
|
Change from
January 31
2022
|
|
(unaudited)
(thousands, except per
share amounts)
|
|
January 31
2023
|
|
|
October 31
2022
|
|
|
January 31
2022
|
|
|
Results from
Operations
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
$
|
242,280
|
|
$
|
240,202
|
|
$
|
233,072
|
|
4
|
%
|
Non-interest
income
|
|
30,611
|
|
|
39,636
|
|
|
32,904
|
|
(7)
|
|
Total
revenue
|
|
272,891
|
|
|
279,838
|
|
|
265,976
|
|
3
|
|
Pre-tax,
pre-provision income(1)
|
|
129,030
|
|
|
132,528
|
|
|
137,110
|
|
(6)
|
|
Common
shareholders' net income
|
|
94,363
|
|
|
67,687
|
|
|
87,642
|
|
8
|
|
Common Share
Information
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.99
|
|
$
|
0.72
|
|
$
|
0.98
|
|
1
|
%
|
Diluted
|
|
0.99
|
|
|
0.72
|
|
|
0.97
|
|
2
|
|
Adjusted(1)
|
|
1.02
|
|
|
0.88
|
|
|
0.99
|
|
3
|
|
Cash
dividends
|
|
0.32
|
|
|
0.31
|
|
|
0.30
|
|
7
|
|
Book
value(1)
|
|
34.26
|
|
|
33.48
|
|
|
33.64
|
|
2
|
|
Closing market
value
|
|
28.12
|
|
|
23.70
|
|
|
38.63
|
|
(27)
|
|
Common shares
outstanding (thousands)
|
|
96,229
|
|
|
94,326
|
|
|
90,203
|
|
7
|
|
Performance
Measures(1)
|
|
|
|
|
|
|
|
|
|
|
|
Return on common
shareholders' equity
|
|
11.6
|
%
|
|
8.6
|
%
|
|
11.6
|
%
|
-
|
bp
|
Adjusted return
on common shareholders' equity
|
|
12.0
|
|
|
10.5
|
|
|
11.8
|
|
20
|
|
Return on
assets
|
|
0.90
|
|
|
0.66
|
|
|
0.93
|
|
(3)
|
|
Net interest
margin
|
|
2.32
|
|
|
2.33
|
|
|
2.47
|
|
(15)
|
|
Efficiency
ratio
|
|
52.7
|
|
|
52.6
|
|
|
48.5
|
|
420
|
|
Operating
leverage
|
|
(9.0)
|
|
|
0.5
|
|
|
(3.9)
|
|
(510)
|
|
Credit
Quality(1)
|
|
|
|
|
|
|
|
|
|
|
|
Provision for
(recovery of) credit losses on total loans as a percentage of
average loans(2)
|
|
(0.09)
|
|
|
0.14
|
|
|
0.11
|
|
(20)
|
|
Provision for
(recovery of) credit losses on impaired loans as a percentage of
average loans(2)
|
|
(0.12)
|
|
|
-
|
|
|
0.12
|
|
(24)
|
|
Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
$
|
41,711,554
|
|
$
|
41,431,558
|
|
$
|
37,676,997
|
|
11
|
%
|
Loans(3)
|
|
36,416,656
|
|
|
35,905,622
|
|
|
33,364,006
|
|
9
|
|
Deposits
|
|
33,113,849
|
|
|
33,010,462
|
|
|
30,294,781
|
|
9
|
|
Debt
|
|
3,808,247
|
|
|
3,461,899
|
|
|
3,041,667
|
|
25
|
|
Shareholders'
equity
|
|
3,871,964
|
|
|
3,732,976
|
|
|
3,609,475
|
|
7
|
|
Off-Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
|
Wealth
Management
|
|
|
|
|
|
|
|
|
|
|
|
Assets
under management and administration
|
|
8,260,366
|
|
|
7,825,003
|
|
|
8,689,298
|
|
(5)
|
|
Assets
under advisement(4)
|
|
1,924,278
|
|
|
1,824,961
|
|
|
2,185,748
|
|
(12)
|
|
Assets Under
Administration - Other
|
|
14,290,188
|
|
|
13,943,199
|
|
|
14,421,779
|
|
(1)
|
|
Capital
Adequacy(5)
|
|
|
|
|
|
|
|
|
|
|
|
Common equity
Tier 1 ratio
|
|
9.1
|
%
|
|
8.8
|
%
|
|
9.0
|
%
|
10
|
bp
|
Tier 1
ratio
|
|
10.9
|
|
|
10.6
|
|
|
10.9
|
|
-
|
|
Total
ratio
|
|
12.8
|
|
|
12.1
|
|
|
12.5
|
|
30
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Number of
full-time equivalent staff
|
|
2,737
|
|
|
2,712
|
|
|
2,643
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Non-GAAP measure –
refer to definitions and detail provided on page 5.
|
(2)
|
Includes provisions for
credit losses on loans, committed but undrawn credit exposures and
letters of credit.
|
(3)
|
Excludes the allowance
for credit losses.
|
(4)
|
Primarily comprised of
assets under advisement related to our Indigenous Services wealth
management business.
|
(5)
|
Calculated using the
Standardized approach in accordance with guidelines issued
by the Office of the Superintendent of Financial Institutions
Canada (OSFI).
|
|
|
|
bp – basis
point
|
SOURCE CWB Financial Group