National Bank of Canada Q1 2024 Report to Shareholders (Part 1)

RNS Number : 8195E

National Bank of Canada

28 February 2024

Regulatory Announcement (Part 1)

Q1 2024 Results

National Bank of Canada (the "Bank") announces publication of its First Quarter 2024 Report to Shareholders. The First Quarter Results have been uploaded to the National Storage Mechanism and will shortly be available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and is available on the Bank's website at https://www.nbc.ca/about-us/investors/quarterly-results.html

To view the full PDF of this First Quarter 2024 Report to Shareholders, please click on the following link:

http://www.rns-pdf.londonstockexchange.com/rns/8195E_1-2024-2-28.pdf

Report to Shareholders First Quarter 2024

National Bank reports its results for the First Quarter of 2024

The financial information reported in this document is based on the unaudited interim condensed consolidated financial statements for the quarter ended January 31, 2024 and is prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise indicated. IFRS represent Canadian generally accepted accounting principles (GAAP). All amounts are presented in Canadian dollars.

MONTREAL, February 28, 2024 - For the first quarter of 2024, National Bank is reporting net income of $922 million, up 5% from $876 million in the first quarter of 2023. First-quarter diluted earnings per share stood at $2.59 compared to $2.47 in the first quarter of 2023. These increases were driven by total revenue growth in all of the business segments as well as by the impact of the Canadian government's 2022 tax measures on income taxes in the first quarter of 2023. Excluding the impact of those measures, adjusted net income⁽¹⁾ and adjusted diluted earnings per share⁽¹⁾ both increased by 2% compared to the first quarter of 2023.

"National Bank delivered strong performance and excellent return on equity for the first quarter of 2024, underpinned by sustained momentum and execution across our business segments. These results reflect the earnings power of our diversified business mix and relevance of our defensive posture," said Laurent Ferreira, President and Chief Executive Officer of National Bank of Canada.

"Our effective capital deployment, active cost management, and commitment to maintaining a prudent credit profile are serving us well, particularly in an uncertain macroeconomic environment. We enter the second quarter on solid footing," added Mr. Ferreira.

Highlights

(millions of Canadian dollars)		Quarter ended January 31
		2024			2023⁽²⁾		% Change
Net income		922			876		5
Diluted earnings per share (dollars)	$	2.59		$	2.47		5
Income before provisions for credit losses and income taxes		1,261			1,172		8
Return on common shareholders' equity⁽³⁾		17.1	%		17.9	%
Dividend payout ratio⁽³⁾		43.1	%		38.6	%
Operating results - Adjusted⁽¹⁾
Net income - Adjusted		922			900		2
Diluted earnings per share - Adjusted (dollars)	$	2.59		$	2.54		2
Income before provisions for credit losses and income taxes - Adjusted		1,371			1,302		5

	As at January 31, 2024			As at October 31, 2023
CET1 capital ratio under Basel III⁽⁴⁾		13.1	%		13.5	%
Leverage ratio under Basel III⁽⁴⁾		4.3	%		4.4	%

(1) See the Financial Reporting Method section on pages 4 to 8 for additional information on non-GAAP financial measures.

(2) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the unaudited interim condensed consolidated financial statements for the quarter ended January 31, 2024.

(3) See the Glossary section on pages 43 to 46 for details on the composition of these measures.

(4) See the Financial Reporting Method section on pages 4 to 8 for additional information on capital management measures.

Report to Shareholders First Quarter 2024

Personal and Commercial

- Net income totalled $339 million in the first quarter of 2024 versus $326 million in the first quarter of 2023, a 4% increase that was driven by growth in total revenues, partly offset by higher non-interest expenses and higher provisions for credit losses.

- Income before provisions for credit losses and income taxes totalled $539 million in the first quarter of 2024, up 5% from $511 million in the first quarter of 2023.

- At $1,154 million, first-quarter total revenues rose $50 million or 5% year over year due mainly to an increase in net interest income (driven by growth in loan and deposit volumes) and to a higher net interest margin.

- Compared to a year ago, personal lending grew 2% and commercial lending grew 11%.

- Net interest margin⁽¹⁾ stood at 2.36% in the first quarter of 2024, up from 2.35% in the first quarter of 2023.

- First-quarter non-interest expenses stood at $615 million, up 4% year over year.

- First-quarter provisions for credit losses rose $10 million year over year, mainly due to higher allowances for credit losses on impaired loans.

- At 53.3%, the efficiency ratio⁽¹⁾ improved from 53.7% in the first quarter of 2023.

Wealth Management

- Net income totalled $196 million in the first quarter of 2024, down 1% from $198 million in the first quarter of 2023.

- First-quarter total revenues amounted to $660 million compared to $637 million in first-quarter 2023, a $23 million or 4% increase driven essentially by growth in fee-based revenues owing to strong stock market performance.

- First-quarter non-interest expenses stood at $390 million, up 7% from $364 million in first-quarter 2023.

- At 59.1%, the efficiency ratio⁽¹⁾ compares to 57.1% in the first quarter of 2023.

Financial Markets

- Net income totalled $308 million in the first quarter of 2024, up 3% from $298 million in the first quarter of 2023.

- First-quarter total revenues on a taxable equivalent basis amounted to $755 million, up $66 million or 10% given an increase in global markets revenues and an increase in revenues from corporate and investment banking services.

- First-quarter non-interest expenses stood at $313 million compared to $287 million in first-quarter 2023, an increase that was partly due to compensation and employee benefits as well as to the segment's technological investments.

- Provisions for credit losses of $17 million were recorded in the first quarter of 2024 compared to $9 million in credit loss recoveries recorded in the first quarter of 2023.

- At 41.5%, the efficiency ratio⁽¹⁾ on a taxable equivalent basis improved from 41.7% in the first quarter of 2023.

U.S. Specialty Finance and International

- Net income totalled $150 million in the first quarter of 2024 versus $147 million in the first quarter of 2023.

- First-quarter total revenues amounted to $326 million, a 2% year-over-year increase that was essentially driven by revenue growth at the ABA Bank subsidiary.

- First-quarter non-interest expenses stood at $100 million, a 2% year-over-year increase attributable mainly to business growth at ABA Bank.

- Provisions for credit losses rose $1 million year over year.

- At 30.7%, the efficiency ratio⁽¹⁾ was stable compared to the first quarter of 2023.

Other

- There was a net loss of $71 million in the first quarter of 2024 versus a net loss of $93 million in the first quarter of 2023, a change arising from a $24 million income tax expense related to the Canadian government's 2022 tax measures recorded in the first quarter of 2023.

Capital Management

- As at January 31, 2024, the Common Equity Tier 1 (CET1) capital ratio under Basel III⁽²⁾ stood at 13.1%, down from 13.5% as at October 31, 2023, notably due to a negative impact of implementing the revised market risk and credit valuation adjustment (CVA) risk frameworks.

- As at January 31, 2024, the Basel III⁽²⁾ leverage ratio was 4.3%, down from 4.4% as at October 31, 2023.

(1) See the Glossary section on pages 43 to 46 for details on the composition of these measures.

(2) See the Financial Reporting Method section on pages 4 to 8 for additional information on capital management measures.

Management's Discussion

and Analysis

February 27, 2024

The following Management's Discussion and Analysis (MD&A) presents the financial condition and operating results of National Bank of Canada (the Bank). This analysis was prepared in accordance with the requirements set out in National Instrument 51-102, Continuous Disclosure Obligations, released by the Canadian Securities Administrators (CSA). It is based on the unaudited interim condensed consolidated financial statements (the consolidated financial statements) for the quarter ended January 31, 2024 and prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise indicated. IFRS represent Canadian generally accepted accounting principles (GAAP). This MD&A should be read in conjunction with the consolidated financial statements and accompanying notes for the quarter ended January 31, 2024 and with the 2023 Annual Report. All amounts are presented in Canadian dollars. Additional information about the Bank, including the Annual Information Form, can be obtained from the Bank's website at nbc.ca and SEDAR+'s website at sedarplus.ca. The information found in the various documents and reports published by the Bank or the information available on the Bank's website and mentioned herein is not and should not be considered incorporated by reference into the Report to Shareholders, the Management's Discussion and Analysis, or the Consolidated Financial Statements, unless expressly stated otherwise.

Financial Reporting Method	4	Capital Management	20
Highlights	9	Risk Management	26
Economic Review and Outlook	10	Risk Disclosures	41
Financial Analysis	11	Accounting Policies and Financial Disclosure	42
Consolidated Results	11	Accounting Policies and Critical Accounting Estimates	42
Results by Segment	13	Financial Disclosure	42
Consolidated Balance Sheet	17	Quarterly Financial Information	42
Event After the Consolidated Balance Sheet Date	19	Glossary	43
Related Party Transactions	19
Securitization and Off-Balance-Sheet Arrangements	19
Income Taxes	19

Caution Regarding Forward-Looking Statements

Certain statements in this document are forward-looking statements. All such statements are made in accordance with applicable securities legislation in Canada and the United States. The forward-looking statements in this document may include, but are not limited to, statements made about the economy, market changes, the Bank's objectives, outlook, and priorities for fiscal year 2024 and beyond, the strategies or actions that will be taken to achieve them, expectations for the Bank's financial condition, its activities, the regulatory environment in which it operates, its environmental, social, and governance targets and commitments, and certain risks to which the Bank is exposed. These forward-looking statements are typically identified by verbs or words such as "outlook", "believe", "foresee", "forecast", "anticipate", "estimate", "project", "expect", "intend" and "plan", in their future or conditional forms, notably verbs such as "will", "may", "should", "could" or "would" as well as similar terms and expressions.

Such forward-looking statements are made for the purpose of assisting the holders of the Bank's securities in understanding the Bank's financial position and results of operations as at and for the periods ended on the dates presented, as well as the Bank's vision, strategic objectives, and performance targets, and may not be appropriate for other purposes. These forward-looking statements are based on current expectations, estimates, assumptions and intentions and are subject to uncertainty and inherent risks, many of which are beyond the Bank's control. There is a strong possibility that the Bank's express or implied predictions, forecasts, projections, expectations, or conclusions will not prove to be accurate, that its assumptions may not be confirmed, and that its vision, strategic objectives, and performance targets will not be achieved. The Bank cautions investors that these forward-looking statements are not guarantees of future performance and that actual events or results may differ significantly from these statements due to a number of factors. Thus, the Bank recommends that readers not place undue reliance on these forward-looking statements, as a number of factors could cause actual results to differ significantly from the expectations, estimates, or intentions expressed in these forward-looking statements. Investors and others who rely on the Bank's forward-looking statements should carefully consider the factors listed below as well as the uncertainties they represent and the risk they entail. Except as required by law, the Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time, by it or on its behalf.

Assumptions about the performance of the Canadian and U.S. economies in 2024 and how that performance will affect the Bank's business are among the factors considered in setting the Bank's strategic priorities and objectives, including provisions for credit losses. These assumptions appear in the Economic Review and Outlook section and, for each business segment, in the Economic and Market Review sections of the 2023 Annual Report and in the Economic Review and Outlook section of this Report to Shareholders, and may be updated in the quarterly reports to shareholders filed thereafter.

The forward-looking statements made in this document are based on a number of assumptions and are subject to risk factors, many of which are beyond the Bank's control and the impacts of which are difficult to predict. These risk factors include, among others, the general economic environment and financial market conditions in Canada, the United States, and the other countries where the Bank operates; the impact of upheavals in the U.S. banking industry; exchange rate and interest rate fluctuations; inflation; global supply chain disruptions; higher funding costs and greater market volatility; changes made to fiscal, monetary, and other public policies; changes made to regulations that affect the Bank's business; geopolitical and sociopolitical uncertainty; climate change, including physical risks and those related to the transition to a low-carbon economy, and the Bank's ability to satisfy stakeholder expectations on environmental and social issues; significant changes in consumer behaviour; the housing situation, real estate market, and household indebtedness in Canada; the Bank's ability to achieve its key short-term priorities and long-term strategies; the timely development and launch of new products and services; the Bank's ability to recruit and retain key personnel; technological innovation, including advances in artificial intelligence and the open banking system, and heightened competition from established companies and from competitors offering non-traditional services; changes in the performance and creditworthiness of the Bank's clients and counterparties; the Bank's exposure to significant regulatory matters or litigation; changes made to the accounting policies used by the Bank to report financial information, including the uncertainty inherent to assumptions and critical accounting estimates; changes to tax legislation in the countries where the Bank operates; changes made to capital and liquidity guidelines as well as to the presentation and interpretation thereof; changes to the credit ratings assigned to the Bank by financial and extra-financial rating agencies; potential disruptions to key suppliers of goods and services to the Bank; the potential impacts of disruptions to the Bank's information technology systems, including cyberattacks as well as identity theft and theft of personal information; the risk of fraudulent activity; and possible impacts of major events affecting the economy, market conditions, or the Bank's outlook, including international conflicts, natural disasters, public health crises, and the measures taken in response to these events.

The foregoing list of risk factors is not exhaustive, and the forward-looking statements made in this document are also subject to credit risk, market risk, liquidity and funding risk, operational risk, regulatory compliance risk, reputation risk, strategic risk, and social and environmental risk as well as certain emerging risks or risks deemed significant. Additional information about these factors is provided in the Risk Management section of the 2023 Annual Report and in the Risk Management section of this Report to Shareholders for the First Quarter of 2024, and may be updated in the quarterly reports to shareholders filed thereafter.

Financial Reporting Method

The Bank's consolidated financial statements are prepared in accordance with IFRS, as issued by the IASB. The financial statements also comply with section 308(4) of the Bank Act (Canada), which states that, except as otherwise specified by the Office of the Superintendent of Financial Institutions (Canada) (OSFI), the consolidated financial statements are to be prepared in accordance with IFRS, which represent Canadian GAAP. None of the OSFI accounting requirements are exceptions to IFRS.

The presentation of segment disclosures is consistent with the presentation adopted by the Bank for the fiscal year beginning November 1, 2023. This presentation reflects the retrospective application of accounting policy changes arising from the adoption of IFRS 17 - Insurance Contracts (IFRS 17). For additional information, see Note 2 to the consolidated financial statements. The figures for the 2023 quarters have been adjusted to reflect these accounting policy changes.

Non-GAAP and Other Financial Measures

The Bank uses a number of financial measures when assessing its results and measuring overall performance. Some of these financial measures are not calculated in accordance with GAAP. Regulation 52-112 Respecting Non-GAAP and Other Financial Measures Disclosure (Regulation 52-112) prescribes disclosure requirements that apply to the following measures used by the Bank:

· non-GAAP financial measures;

· non-GAAP ratios;

· supplementary financial measures;

· capital management measures.

Non-GAAP Financial Measures

The Bank uses non-GAAP financial measures that do not have standardized meanings under GAAP and that therefore may not be comparable to similar measures used by other companies. Presenting non-GAAP financial measures helps readers to better understand how management analyzes results, shows the impacts of specified items on the results of the reported periods, and allows readers to better assess results without the specified items if they consider such items not to be reflective of the underlying performance of the Bank's operations. In addition, the Bank uses the taxable equivalent basis to calculate net interest income, non-interest income, and income taxes. This calculation method consists of grossing up certain revenues taxed at lower rates (notably dividends) by the income tax to a level that would make it comparable to revenues from taxable sources in Canada. An equivalent amount is added to income taxes. This adjustment is necessary in order to perform a uniform comparison of the return on different assets, regardless of their tax treatment. However, in light of the proposed legislation with respect to Canadian dividends, the Bank did not either recognize an income tax deduction or use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see the Income Taxes section).

The key non-GAAP financial measures used by the Bank to analyze its results are described below, and a quantitative reconciliation of these measures is presented in the tables in the Reconciliation of Non-GAAP Financial Measures section on page 8 and in the Consolidated Results table on page 11. Note that no specified items have been excluded from results for the quarter ended January 31, 2024. In the first quarter of 2023, a $24 million tax expense related to the Canadian government's 2022 tax measures had been excluded from results given the one-time nature of the item. This amount had included a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion as well as an $8 million tax recovery related to the 1.5% increase in the statutory tax rate, which included the impact related to current and deferred taxes for fiscal 2022.

Adjusted Net Interest Income

This item represents net interest income on a taxable equivalent basis and excluding specified items, if any. A taxable equivalent is added to net interest income so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that net interest income can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Non-Interest Income

This item represents non-interest income on a taxable equivalent basis and excluding specified items, if any. A taxable equivalent is added to non-interest income so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that non‑interest income can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Total Revenues

This item represents total revenues on a taxable equivalent basis and excluding specified items, if any. It consists of adjusted net interest income and adjusted non-interest income. A taxable equivalent is added to total revenues so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that total revenues can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Non-Interest Expenses

This item represents non-interest expenses excluding specified items, if any. Specified items, if any, are excluded so that non-interest expenses can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Income Before Provisions for Credit Losses and Income Taxes

This item represents income before provisions for credit losses and income taxes on a taxable equivalent basis and excluding specified items, if any. It also represents the difference between adjusted total revenues and adjusted non-interest expenses. A taxable equivalent is added to income before provisions for credit losses and income taxes so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that income before provisions for credit losses and income taxes can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Income Taxes

This item represents income taxes on a taxable equivalent basis and excluding income taxes on specified items, if any.

Adjusted Net Income

This item represents net income excluding specified items, if any. Specified items, if any, are excluded so that net income can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Net income Attributable to Common Shareholders

This item represents net income attributable to common shareholders excluding specified items, if any. Specified items, if any, are excluded so that net income attributable to common shareholders can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Basic Earnings Per Share

This item represents basic earnings per share excluding specified items, if any. Specified items, if any, are excluded so that basic earnings per share can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Diluted Earnings Per Share

This item represents diluted earnings per share excluding specified items, if any. Specified items, if any, are excluded so that diluted earnings per share can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

The Bank also uses the below-described measures to assess its results. A quantitative reconciliation of these non-GAAP financial measures is presented in the Reconciliation of Non-GAAP Financial Measures section on page 8.

Adjusted Non-Trading Net Interest Income

This item represents non-trading net interest income on a taxable equivalent basis. It includes revenues related to financial assets and financial liabilities associated with non-trading activities, net of interest expenses and interest income related to the financing of these financial assets and liabilities, and is used to calculate adjusted non-trading net interest margin. A taxable equivalent is added to non-trading net interest income so that the performance of the various assets can be compared irrespective of their tax treatment.

Net Interest Income From Trading Activities on a Taxable Equivalent Basis

This item represents net interest income from trading activities plus a taxable equivalent. It comprises dividends related to financial assets and liabilities associated with trading activities and certain interest income related to the financing of these financial assets and liabilities, net of interest expenses. A taxable equivalent is added to net interest income from trading activities so that the performance of the various assets can be compared irrespective of their tax treatment.

Non-Interest Income Related to Trading Activities on a Taxable Equivalent Basis

This item represents non-interest income related to trading activities to which a taxable equivalent amount is added. It consists of realized and unrealized gains and losses as well as interest income on securities measured at fair value through profit or loss, income from held-for-trading derivative financial instruments, changes in the fair value of loans at fair value through profit or loss, changes in the fair value of financial instruments designated at fair value through profit or loss, realized and unrealized gains and losses as well as interest expense on obligations related to securities sold short, certain commission income as well as other trading activity revenues, and any applicable transaction costs. A taxable equivalent amount is added to the non-interest income related to trading activities such that the returns of different assets can be compared irrespective of their tax treatment.

Trading Activity Revenues on a Taxable Equivalent Basis

This item represents trading activity revenues plus a taxable equivalent. These revenues comprise dividends related to financial assets and liabilities associated with trading activities; certain interest income related to the financing of these financial assets and liabilities, net of interest expenses; realized and unrealized gains and losses as well as interest income on securities measured at fair value through profit or loss; income from held-for-trading derivative financial instruments; changes in the fair value of loans at fair value through profit or loss; changes in the fair value of financial instruments designated at fair value through profit or loss; realized and unrealized gains and losses as well as interest expense on obligations related to securities sold short; certain commission income as well as other trading activity revenues, and any applicable transaction costs. A taxable equivalent is added to trading activity revenues so that the performance of the various assets can be compared irrespective of their tax treatment.

Non-GAAP Ratios

The Bank uses non-GAAP ratios that do not have standardized meanings under GAAP and that may therefore not be comparable to similar measures used by other companies. A non-GAAP ratio is a ratio in which at least one component is a non-GAAP financial measure. The Bank uses non-GAAP ratios to present aspects of its financial performance or financial position.

The key non-GAAP ratios used by the Bank are described below.

Adjusted Return on Common Shareholders' Equity (ROE)

This item represents ROE excluding specified items, if any. It is adjusted net income attributable to common shareholders expressed as a percentage of average equity attributable to common shareholders. It is a general measure of the Bank's efficiency in using equity. Specified items, if any, are excluded so that ROE can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Dividend Payout Ratio

This item represents the dividend payout ratio excluding specified items, if any. It is dividends on common shares (per share amount) expressed as a percentage of adjusted basic earnings per share. This ratio is a measure of the proportion of earnings that is paid out to shareholders in the form of dividends. Specified items, if any, are excluded so that the dividend payout ratio can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Operating Leverage

This item represents operating leverage on a taxable equivalent basis and excluding specified items, if any. It is the difference between the growth rate of adjusted total revenues and the growth rate of adjusted non-interest expenses, and it measures the sensitivity of the Bank's results to changes in its revenues. Adjusted operating leverage is presented on a taxable equivalent basis so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that the efficiency ratio can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Efficiency Ratio

This item represents the efficiency ratio on a taxable equivalent basis and excluding specified items, if any. The ratio represents adjusted non-interest expenses expressed as a percentage of adjusted total revenues. It measures the efficiency of the Bank's operations. The adjusted efficiency ratio is presented on a taxable equivalent basis so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that the efficiency ratio can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

Adjusted Net Interest Margin, Non-Trading

This item represents the non-trading net interest margin on a taxable equivalent basis. It is calculated by dividing net interest income related to adjusted non-trading activities by average non-trading interest-bearing assets. This ratio is a measure of the profitability of non-trading activities. The adjusted non-trading net interest margin includes adjusted non-trading net interest income, which includes a taxable equivalent amount so that the performance of the various assets can be compared irrespective of their tax treatment.

Supplementary Financial Measures

A supplementary financial measure is a financial measure that: (a) is not reported in the Bank's consolidated financial statements, and (b) is, or is intended to be, reported periodically to represent historical or expected financial performance, financial position, or cash flows. The composition of these supplementary financial measures is presented in table footnotes or in the Glossary section on pages 43 to 46 of this MD&A.

Capital Management Measures

The financial reporting framework used to prepare the financial statements requires disclosure that helps readers assess the Bank's capital management objectives, policies, and processes, as set out in IFRS in IAS 1 - Presentation of Financial Statements. The Bank has its own methods for managing capital and liquidity, and IFRS does not prescribe any particular calculation method. These measures are calculated using various guidelines and advisories issued by OSFI, which are based on the standards, recommendations, and best practices of the Basel Committee on Banking Supervision (BCBS), as presented in the following table.

OSFI guideline or advisory	Measure
Capital Adequacy Requirements	Common Equity Tier 1 (CET1) capital ratio Tier 1 capital ratio Total capital ratio CET1 capital Tier 1 capital Tier 2 capital Total capital Risk-weighted assets Maximum credit risk exposure under the Basel asset classes
Leverage Requirements	Leverage ratio Total exposure
Total Loss Absorbing Capacity (TLAC)	Key indicators - TLAC requirements Available TLAC TLAC ratio TLAC leverage ratio
Liquidity Adequacy Requirements	Liquid asset portfolio Encumbered assets and unencumbered assets Liquidity coverage ratio (LCR) High-quality liquid assets (HQLA) Cash inflows/outflows and net cash outflows Net stable funding ratio (NSFR) Available stable funding items Required stable funding items
Global Systemically Important Banks (G-SIBs) - Public Disclosure Requirements	G-SIB indicators

Reconciliation of Non-GAAP Financial Measures

Presentation of Results - Adjusted

(millions of Canadian dollars)						Quarter ended January 31
							2024	2023⁽¹⁾
		Personal and Commercial	Wealth Management	Financial Markets	USSF&I	Other
		Personal and Commercial	Wealth Management	Financial Markets	USSF&I	Other	Total	Total
Net interest income		870	198	(553)	301	(65)	751	1,099
Taxable equivalent⁽²⁾		−	−	35	−	2	37	78
Net interest income - Adjusted		870	198	(518)	301	(63)	788	1,177
Non-interest income		284	462	1,200	25	(12)	1,959	1,463
Taxable equivalent		−	−	73	−	−	73	52
Non-interest income - Adjusted		284	462	1,273	25	(12)	2,032	1,515
Total revenues - Adjusted		1,154	660	755	326	(75)	2,820	2,692
Non-interest expenses		615	390	313	100	31	1,449	1,390
Income before provisions for credit losses and income taxes - Adjusted		539	270	442	226	(106)	1,371	1,302
Provisions for credit losses		71	−	17	36	(4)	120	86
Income before income taxes - Adjusted		468	270	425	190	(102)	1,251	1,216
Income taxes		129	74	9	40	(33)	219	210
Taxable equivalent		−	−	108	−	2	110	130
Income taxes related to the Canadian government's 2022
	tax measures⁽³⁾	−	−	−	−	−	−	(24)
Income taxes - Adjusted		129	74	117	40	(31)	329	316
Net income - Adjusted		339	196	308	150	(71)	922	900
Specified items after income taxes		−	−	−	−	−	−	(24)
Net income		339	196	308	150	(71)	922	876
Non-controlling interests		−	−	−	−	−	−	−

Net income attributable to the Bank's shareholders and holders of other equity instruments		339	196	308	150	(71)	922	876
Net income attributable to the Bank's shareholders and holders of other equity instruments - Adjusted		339	196	308	150	(71)	922	900
Dividends on preferred shares and distributions on limited recourse capital notes							37	35
Net income attributable to common shareholders - Adjusted							885	865

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

(2) In light of the proposed legislation with respect to Canadian dividends, the Bank did not either recognize an income tax deduction or use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see the Income Taxes section).

(3) During the quarter ended January 31, 2023, the Bank recorded, in the Other heading of segment results, a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion as well as an $8 million tax recovery related to the 1.5% increase in the statutory tax rate, which included the impact related to current and deferred taxes for fiscal 2022. For additional information on these tax measures, see the Income Taxes section.

Presentation of Basic and Diluted Earnings Per Share - Adjusted

(Canadian dollars)		Quarter ended January 31
		2024		2023⁽¹⁾
Basic earnings per share	$	2.61	$	2.49
Income taxes related to the Canadian government's 2022 tax measures⁽²⁾		−		0.07
Basic earnings per share - Adjusted	$	2.61	$	2.56
Diluted earnings per share	$	2.59	$	2.47
Income taxes related to the Canadian government's 2022 tax measures⁽²⁾		−		0.07
Diluted earnings per share - Adjusted	$	2.59	$	2.54

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

(2) During the quarter ended January 31, 2023, the Bank recorded, in the Other heading segment results, a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion as well as an $8 million tax recovery related to the 1.5% increase in the statutory tax rate, which included the impact related to current and deferred taxes for fiscal 2022. For additional information on these tax measures, see the Income Taxes section.

Presentation of Non-Trading Net Interest Income - Adjusted

(millions of Canadian dollars)	Quarter ended January 31
	2024	2023

Net interest income − Adjusted	788	1,177
Less: Net interest income (loss) related to trading activities on a taxable equivalent basis	(649)	(196)
Net interest income, non-trading − Adjusted	1,437	1,373

Highlights

(millions of Canadian dollars, except per share amounts)			Quarter ended January 31
			2024			2023⁽¹⁾		% Change
Operating results
Total revenues			2,710			2,562		6
Income before provisions for credit losses and income taxes			1,261			1,172		8
Net income			922			876		5
Return on common shareholders' equity⁽²⁾			17.1	%		17.9	%
Operating leverage⁽²⁾			1.6	%		(4.7)	%
Efficiency ratio⁽²⁾			53.5	%		54.3	%
Earnings per share
	Basic	$	2.61		$	2.49		5
	Diluted	$	2.59		$	2.47		5
Operating results - Adjusted⁽³⁾
Total revenues - Adjusted⁽³⁾			2,820			2,692		5
Income before provisions for credit losses and income taxes - Adjusted⁽³⁾			1,371			1,302		5
Net income - Adjusted⁽³⁾			922			900		2
Return on common shareholders' equity - Adjusted⁽⁴⁾			17.1	%		18.4	%
Operating leverage - Adjusted⁽⁴⁾			0.6	%		(2.2)	%
Efficiency ratio - Adjusted⁽⁴⁾			51.4	%		51.6	%
Diluted earnings per share - Adjusted⁽³⁾		$	2.59		$	2.54		2
Common share information
Dividends declared		$	1.06		$	0.97		9
Book value⁽²⁾		$	61.18		$	55.76
Share price
	High	$	103.38		$	99.95
	Low	$	86.50		$	91.02
	Close	$	102.83		$	99.95
Number of common shares (thousands)			339,166			337,318
Market capitalization			34,876			33,715

(millions of Canadian dollars)		As at January 31, 2024		As at October 31, 2023⁽¹⁾		% Change
Balance sheet and off-balance-sheet
Total assets		433,927		423,477		2
Loans and acceptances, net of allowances		230,157		225,443		2
Deposits		300,097		288,173		4
Equity attributable to common shareholders		20,749		20,432		2
Assets under administration⁽²⁾		712,488		652,631		9
Assets under management⁽²⁾		132,822		120,858		10

Regulatory ratios under Basel III⁽⁵⁾
Capital ratios
	Common Equity Tier 1 (CET1)	13.1	%	13.5	%
	Tier 1	15.5	%	16.0	%
	Total	16.2	%	16.8	%
Leverage ratio		4.3	%	4.4	%
TLAC ratio⁽⁵⁾		28.1	%	29.2	%
TLAC leverage ratio⁽⁵⁾		7.8	%	8.0	%
Liquidity coverage ratio (LCR)⁽⁵⁾		145	%	155	%
Net stable funding ratio (NSFR)⁽⁵⁾		117	%	118	%
Other information
Number of employees - Worldwide (full-time equivalent)		28,730		28,916		(1)
Number of branches in Canada		368		368		−
Number of banking machines in Canada		945		944		−

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

(2) See the Glossary section on pages 43 to 46 for details on the composition of these measures.

(3) See the Financial Reporting Method section on pages 4 to 8 for additional information on non-GAAP financial measures.

(4) See the Financial Reporting Method section on pages 4 to 8 for additional information on non-GAAP ratios.

(5) See the Financial Reporting Method section on pages 4 to 8 for additional information on capital management measures.

Economic Review and Outlook

Global Economy

The last few months have seen a marked decline in price increases around the world, such that a growing number of countries, particularly emerging countries, can now boast that they have brought inflation back to the target rate of their central bank. Central bankers are undoubtedly pleased with the latest inflation developments, but they are unlikely to claim victory at this stage, especially given the current geopolitical environment. The recent progress has been highly dependent on disinflation in the goods sector, which is now facing a threat from tensions in the Middle East. While not completely disrupting supply chains, these factors could still make central banks fear a new surge in inflation in goods and, consequently, compel them to hold the pause button longer than otherwise envisioned. This is sure to have a negative impact on growth, especially since there is a lag in monetary policy's impact on the economy, meaning that the economy will continue to show the effects of the latest rate hikes. We believe that, in 2024, global growth could slow to 2.6%⁽¹⁾ (compared to 3.1% last year), being held back by contractions in several of the advanced economies. Faced with a greater-than-expected decline in demand, central banks are expected to respond vigorously by cutting key interest rates sharply in the second half of the year. This move should lead to a gradual rebound in growth in 2025.

The year 2023 will undoubtedly be seen as a good year for the U.S. economy, which managed to grow 2.5% despite one of the most aggressive periods of monetary tightening in recent memory. A significant increase in the federal government's deficit contributed greatly to this growth. The economic resilience was also due to continued deployment of excess household savings as well as to a heavy reliance on credit to support consumption, despite the prohibitively high interest rates. However, several signs point to a more difficult road ahead for the U.S. economy. Many consumers are showing signs of vulnerability, as evidenced by rising delinquency rates on car loans and credit cards. In addition, the job market's resilience is not a given, as most SMEs are reporting falling sales. And while some observers may take comfort that the U.S. Federal Reserve (the Fed) appears to be open to cutting rates in 2024-which would clearly ease the pressure on economic agents-rates will remain restrictive for some time. It should also be recalled that the Fed had indeed cut interest rates in the lead-up to each of the last four recessions, which should give pause to those who are already claiming victory over the continuation of the current economic cycle. On the heels of a good first quarter, we expect growth in the U.S. economy to slow markedly toward midyear. This deceleration should prompt the Fed to begin cutting rates, but we believe that the cuts will come too late to prevent a few quarters of contraction. This forecast translates into growth of 1.9%⁽¹⁾ in 2024 and a 0.3%⁽¹⁾ contraction in 2025.

Canadian Economy

Inflation remains too high in Canada, mainly due to the rising housing component, as the population increase is at odds with the supply of available housing. Faced with this situation, the Bank of Canada is maintaining a tight monetary policy. Paradoxically, this is deterring investment, in particular by slowing construction, which is exacerbating the problem of housing-related inflation. The result is stagflation, i.e., a struggling economy combined with high inflation. Economic growth has been lacklustre for some time, even more so when the demographic context is considered. GDP per capita has fallen 3.1% from its peak in 2022, a fall of a scale that has only been seen during recent recessions. The same is true of the labour market, which is not generating enough jobs to absorb population growth. This situation has been reflected in the sharp drop in employment rates, which has been particularly acute for Canada's youth. We expect that the economic environment will continue to be difficult in 2024, as the economy has yet to feel the full effects of the past rate hikes and as interest rates remain high. Given the tight monetary policy, successive waves of mortgage borrowers will have to renegotiate their loans at higher interest rates, further dampening consumer spending. We expect the Canadian economy to contract around midyear, resulting in stagnant growth in 2024⁽¹⁾. The Bank of Canada is expected to begin cutting its key interest rates at the end of second quarter to breathe some life into a faltering economy.

Quebec Economy

Quebec's GDP posted two consecutive quarters of contraction in mid-2023, leading many to wonder whether a recession lay ahead. We believe that caution is required before drawing such conclusions. In the third quarter, GDP was restrained by falling inventory investments and a decline in international trade, while private domestic demand rallied. In addition, the October data shows that, rather than stalling, the Quebec economy was gathering strength at the start of the fourth quarter. This bout of weakness must be taken in context, meaning, it occurred in the province that had the most overheated economy since the pandemic. Despite the slump in Quebec's GDP, its labour market still posted one of the lowest unemployment rates in Canada (4.5%), and the province had the highest inflation rate in the country according to the most recent data. Higher inflation means that monetary policy is less tight in real terms, and therefore less damaging to Quebec's economy. Compared with the national data, a smaller share of SMEs are now saying that domestic demand is cause for concern. As elsewhere, 2024 is shaping up to be a difficult year, but we continue to believe that Quebec's GDP could hold firm due to strong fundamentals (a lower level of household debt, a greater share of dual-income households, a more affordable real estate market). The proportion of households that describe the state of their household finances as poor was just 23%, compared with 35% nationally (Léger, January 2024). For 2024, we anticipate a slight contraction in the economy of 0.1%⁽¹⁾, but Quebec should continue to post one of the lowest unemployment rates in the country this year, at 5.6%⁽¹⁾ (compared with 6.7%⁽¹⁾ for Canada as a whole).

(1) Actual GDP growth forecasts, National Bank Financial's Economics and Strategy group

Financial Analysis

Consolidated Results

(millions of Canadian dollars)	Quarter ended January 31
	2024		2023⁽¹⁾		% Change
Operating results
Net interest income	751		1,099			(32)
Non-interest income	1,959		1,463			34
Total revenues	2,710		2,562			6
Non-interest expenses	1,449		1,390			4
Income before provisions for credit losses and income taxes	1,261		1,172			8
Provisions for credit losses	120		86			40
Income before income taxes	1,141		1,086			5
Income taxes	219		210			4
Net income	922		876			5
Diluted earnings per share (dollars)	2.59		2.47			5

Taxable equivalent basis⁽²⁾
Net interest income	37		78
Non-interest income	73		52
Income taxes	110		130
Impact of taxable equivalent basis on net income	−		−

Specified items⁽²⁾
Income taxes related to the Canadian government's 2022 tax measures	−		24
Specified items after income taxes	−		(24)
Operating results - Adjusted⁽²⁾
Net interest income - Adjusted	788		1,177			(33)
Non-interest income - Adjusted	2,032		1,515			34
Total revenues - Adjusted	2,820		2,692			5
Non-interest expenses - Adjusted	1,449		1,390			4
Income before provisions for credit losses and income taxes - Adjusted	1,371		1,302			5
Provisions for credit losses	120		86			40
Income before income taxes - Adjusted	1,251		1,216			3
Income taxes - Adjusted	329		316			4
Net income - Adjusted	922		900			2
Diluted earnings per share - Adjusted (dollars)	2.59		2.54			2
Average assets⁽³⁾	442,666		424,946			4
Average loans and acceptances⁽³⁾	228,161		209,699			9
Average deposits⁽³⁾	301,533		281,553			7
Operating leverage⁽⁴⁾	1.6	%	(4.7)	%
Operating leverage - Adjusted⁽⁵⁾	0.6	%	(2.2)	%
Efficiency ratio⁽⁴⁾	53.5	%	54.3	%
Efficiency ratio - Adjusted⁽⁵⁾	51.4	%	51.6	%

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

(2) See the Financial Reporting Method section on pages 4 to 8 for additional information on non-GAAP financial measures.

(3) Represents an average of the daily balances for the period.

(4) See the Glossary section on pages 43 to 46 for details on the composition of these measures.

(5) See the Financial Reporting Method section on pages 4 to 8 for additional information on non-GAAP ratios.

Financial Results

For the first quarter of 2024, the Bank reported net income of $922 million, up 5% from $876 million in the first quarter of 2023. First-quarter diluted earnings per share stood at $2.59 compared to $2.47 in the first quarter of 2023. These increases were partly driven by total revenue growth in all of the business segments.

Excluding the impact of the Canadian government's 2022 tax measures on income taxes in the first quarter of 2023, net income totalled $922 million in the first quarter of 2024, up 2% from adjusted net income of $900 million in the first quarter of 2023, while diluted earnings per share stood at $2.59, also up 2% from adjusted diluted earnings per share of $2.54 in the first quarter of 2023.

Return on common shareholders' equity was 17.1% for the quarter ended January 31, 2024 compared to 17.9% in the same quarter of 2023.

Total Revenues

For the first quarter of 2024, the Bank's total revenues amounted to $2,710 million, up $148 million or 6% from the first quarter of 2023. In the Personal and Commercial segment, first-quarter total revenues rose 5% year over year owing to growth in loans and deposits, to a higher deposit margin as well as to higher credit card revenues and insurance revenues, partly offset by decreases in revenues from derivative financial instruments and in revenues from foreign exchange activities. In the Wealth Management segment, first-quarter total revenues grew 4% year over year, essentially due to higher fee-based revenues, notably revenues from investment management and trust service fees as well as mutual fund revenues. In the Financial Markets segment, first-quarter total revenues on a taxable equivalent basis increased by 10% year over year due to increases in global markets revenues and in corporate and investment banking revenues. In the USSF&I segment, first-quarter total revenues rose 2% year over year owing to revenue growth at ABA Bank (driven by business growth) as well as to annual dividend income from an investment in a financial group recorded in the first quarter of 2024. These items were partly offset by a decrease in Credigy's revenues, mainly due to revenues recorded upon a credit facility prepayment in the first quarter of 2023. For the Other heading of segment results, first-quarter total revenues remained stable year over year.

Non-Interest Expenses

For the first quarter of 2024, non-interest expenses stood at $1,449 million, a 4% year-over-year increase that was attributable to higher compensation and employee benefits (driven by wage growth and a greater number of employees) as well as to the variable compensation associated with revenue growth. Occupancy expense, including amortization expense, was also up, partly due to the expanding banking network at ABA Bank and to expenses related to the Bank's new head office building. Technology expenses, including amortization, were up, stemming from significant investments made to support the Bank's technological evolution and business development plan, while professional fees and other expenses also increased year over year.

Provisions for Credit Losses

For the first quarter of 2024, the Bank recorded $120 million in provisions for credit losses compared to $86 million in the first quarter of 2023. Provisions for credit losses on impaired loans, excluding purchased or originated credit-impaired (POCI) ⁽¹⁾ loans rose $79 million year over year. This increase came from Personal Banking (including credit card receivables) and Commercial Banking, reflecting a normalization of credit performance, as well as from the Credigy (excluding POCI loans) and ABA Bank subsidiaries. In addition, during the first quarter of 2023, greater recoveries of credit losses on impaired loans had been recorded in the Financial Markets segment. As for first-quarter provisions for credit losses on non-impaired loans, they were down $28 million year over year, mainly due to updated scenarios reflecting a more favourable macroeconomic outlook and to a greater deterioration in credit risk in the first quarter of 2023. This decrease was partly offset by growth in the loan portfolios and a recalibration of certain risk parameters. Lastly, first-quarter provisions for credit losses on POCI loans were down $17 million year over year due to favourable remeasurements of certain Credigy portfolios during the first quarter of 2024 as well as to recoveries of credit losses following repayments of Commercial Banking POCI loans.

Income Taxes

For the first quarter of 2024, income taxes stood at $219 million compared to $210 million in the same quarter of 2023. The effective income tax rate for first-quarter 2024 was 19%, unchanged from the same quarter of 2023 despite the impact in first-quarter 2023 of certain enacted tax measures, namely, the Canada Recovery Dividend and the additional 1.5% tax on banks and life insurers. This is mainly explained by the decrease in tax-exempt income in first-quarter 2024, which reflects the denial of the deduction in respect of dividends covered by Bill C-59 since January 1, 2024.

(1) See the Glossary section on pages 43 to 46 for details on the composition of these measures.

Results by Segment

The Bank carries out its activities in four business segments: Personal and Commercial, Wealth Management, Financial Markets, and U.S. Specialty Finance and International, which mainly comprises the activities of the Credigy Ltd. (Credigy) and Advanced Bank of Asia Limited (ABA Bank) subsidiaries. Other operating activities, certain specified items, Treasury activities, and the operations of the Flinks Technology Inc. (Flinks) subsidiary are grouped in the Other heading of segment results. Each reportable segment is distinguished by services offered, type of clientele, and marketing strategy.

Personal and Commercial

(millions of Canadian dollars)	Quarter ended January 31
	2024		2023⁽¹⁾		% Change
Operating results
Net interest income	870		825		5
Non-interest income	284		279		2
Total revenues	1,154		1,104		5
Non-interest expenses	615		593		4
Income before provisions for credit losses and income taxes	539		511		5
Provisions for credit losses	71		61		16
Income before income taxes	468		450		4
Income taxes	129		124		4
Net income	339		326		4
Net interest margin⁽²⁾	2.36	%	2.35	%
Average interest-bearing assets⁽²⁾	146,700		139,215		5
Average assets⁽³⁾	155,031		146,131		6
Average loans and acceptances⁽³⁾	153,291		145,347		5
Net impaired loans⁽²⁾	323		215		50
Net impaired loans as a % of total loans and acceptances⁽²⁾	0.2	%	0.1	%
Average deposits⁽³⁾	88,949		85,051		5
Efficiency ratio⁽²⁾	53.3	%	53.7	%

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

(2) See the Glossary section on pages 43 to 46 for details on the composition of these measures.

(3) Represents an average of the daily balances for the period.

In the Personal and Commercial segment, net income totalled $339 million in the first quarter of 2024 compared to $326 million in the first quarter of 2023, a 4% year-over-year increase driven by total revenue growth, partly offset by higher non-interest expenses and higher provisions for credit losses. The segment's first-quarter net interest income rose 5% year over year owing mainly to growth in personal and commercial loans and deposits. The net interest margin was 2.36% in first-quarter 2024 versus 2.35% in first-quarter 2023, as a growing deposit margin was offset by a declining margin on loans. As for first-quarter non-interest income, it grew $5 million or 2% year over year.

Personal Banking's first-quarter total revenues posted a $37 million year-over-year increase that was driven by higher net interest income, attributable to growth in loans and deposits and an improved deposit margin, as well as to increases in credit card revenues, insurance revenues, and internal commission revenues arising from the distribution of Wealth Management products. Commercial Banking's first-quarter total revenues grew $13 million year over year, mainly due to an increase in net interest income that was driven by loan and deposit growth, partly offset by a lower net interest margin on loans and deposits and by decreases in revenues from derivative financial instruments and in revenues from foreign exchange activities.

For the first quarter of 2024, the Personal and Commercial segment's non-interest expenses stood at $615 million, a 4% year-over-year increase that was due to higher compensation and employee benefits (driven by wage growth) and to greater investment in the segment's technological evolution. At 53.3% in the first quarter of 2024, the efficiency ratio improved by 0.4 percentage points year over year. The segment recorded $71 million in provisions for credit losses in the first quarter of 2024 compared to $61 million in the first quarter of 2023. This increase was mainly due to higher provisions for credit losses on impaired Personal Banking loans (including credit card receivables) and impaired Commercial Banking loans, reflecting a normalization of credit performance. As for first-quarter provisions for credit losses on non-impaired loans, they were down year over year. Also, the segment recorded recoveries of credit losses on Commercial Banking's POCI loans during the first quarter of 2024 as a result of loan repayments.

Wealth Management

(millions of Canadian dollars)	Quarter ended January 31
	2024		2023		% Change
Operating results
Net interest income	198		208		(5)
Fee-based revenues	375		347		8
Transaction-based and other revenues	87		82		6
Total revenues	660		637		4
Non-interest expenses	390		364		7
Income before provisions for credit losses and income taxes	270		273		(1)
Provisions for credit losses	−		−		−
Income before income taxes	270		273		(1)
Income taxes	74		75		(1)
Net income	196		198		(1)
Average assets⁽¹⁾	8,708		8,523		2
Average loans and acceptances⁽¹⁾	7,713		7,548		2
Net impaired loans⁽²⁾	5		8		(38)
Average deposits⁽¹⁾	41,216		40,214		2
Assets under administration⁽²⁾	712,488		652,873		9
Assets under management⁽²⁾	132,822		119,774		11
Efficiency ratio⁽²⁾	59.1	%	57.1	%

(1) Represents an average of the daily balances for the period.

(2) See the Glossary section on pages 43 to 46 for details on the composition of these measures.

In the Wealth Management segment, net income totalled $196 million in the first quarter of 2024, down 1% from $198 million in the first quarter of 2023. Growth in the segment's total revenues was more than offset by higher non-interest expenses. First-quarter total revenues amounted to $660 million, up $23 million or 4% from $637 million in the first quarter of 2023. First-quarter net interest income was down 5% year over year due to changes in the composition of deposits. Fee-based revenues increased by 8%, mostly due to stronger stock market performance compared to the first quarter of 2023 and to positive net inflows into various solutions. As for first-quarter transaction-based and other revenues, they increased 6% year over year.

The segment's non-interest expenses stood at $390 million in the first quarter of 2024 versus $364 million in first-quarter 2023, a 7% year-over-year increase that was attributable to higher compensation and employee benefits, notably the variable compensation associated with revenue growth, higher external management fees, and higher technology expenses. At 59.1%, the first-quarter efficiency ratio deteriorated when compared to 57.1% in the first quarter of 2023. The segment's provisions for credit losses were negligible in the first quarters of 2024 and 2023.

Financial Markets

(taxable equivalent basis)⁽¹⁾
(millions of Canadian dollars)		Quarter ended January 31
		2024		2023		% Change
Operating results
Global markets
	Equities	222		192		16
	Interest rate and credit	158		151		5
	Commodities and foreign exchange	71		54		31
		451		397		14
Corporate and investment banking		304		292		4
Total revenues⁽¹⁾		755		689		10
Non-interest expenses		313		287		9
Income before provisions for credit losses and income taxes		442		402		10
Provisions for credit losses		17		(9)
Income before income taxes		425		411		3
Income taxes⁽¹⁾		117		113		4
Net income		308		298		3
Average assets⁽²⁾		190,443		173,262		10
Average loans and acceptances⁽²⁾ (Corporate Banking only)		31,659		27,066		17
Net impaired loans⁽³⁾		20		81		(75)
Net impaired loans as a % of total loans and acceptances⁽³⁾		0.1	%	0.3	%
Average deposits⁽²⁾		63,335		52,820		20
Efficiency ratio⁽³⁾		41.5	%	41.7	%

(1) The Total revenues and Income taxes items of the Financial Markets segment are presented on a taxable equivalent basis. Taxable equivalent basis is a calculation method that consists in grossing up certain revenues taxed at lower rates by the income tax to a level that would make it comparable to revenues from taxable sources in Canada. For the quarter ended January 31, 2024, Total revenues were grossed up by $108 million ($129 million in 2023) and an equivalent amount was recognized in Income taxes. The effect of these adjustments is reversed under the Other heading of segment results. In light of the proposed legislation with respect to Canadian dividends, the Bank did not either recognize an income tax deduction or use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see the Income Taxes section).

(2) Represents an average of the daily balances for the period.

(3) See the Glossary section on pages 43 to 46 for details on the composition of these measures.

In the Financial Markets segment, net income totalled $308 million in the first quarter of 2024, up 3% from $298 million in the first quarter of 2023. Income before provisions for credit losses and income taxes totalled $442 million in the first quarter of 2024, up 10% year over year. The segment's first-quarter total revenues on a taxable equivalent basis amounted to $755 million, up $66 million or 10% from $689 million in the first quarter of 2023. Global markets revenues rose 14% year over year owing to growth in all revenue types. First-quarter corporate and investment banking revenues grew 4% year over year given an increase in banking service revenues, partly offset by a decrease in revenues from merger and acquisition activities.

For the first quarter of 2024, the segment's non-interest expenses stood at $313 million, a 9% year-over-year increase that was due to higher compensation and employee benefits (notably the variable compensation associated with revenue growth), to higher technology investment expenses, and to higher other expenses related to the segment's business growth. At 41.5%, first-quarter efficiency ratio improved by 0.2 percentage points compared to 41.7% in the first quarter of 2023. The segment recorded $17 million in provisions for credit losses in the first quarter of 2024 compared to $9 million in recoveries of credit losses in the first quarter of 2023. This increase came from higher credit loss recoveries on impaired loans recorded in the first quarter of 2023 as well as from a $10 million year-over-year increase in provisions for credit losses on non-impaired loans arising from growth in the loan portfolios.

U.S. Specialty Finance and International (USSF&I)

(millions of Canadian dollars)		Quarter ended January 31
		2024		2023		% Change
Total revenues
	Credigy	125		137		(9)
	ABA Bank	194		180		8
	International	7		2
		326		319		2
Non-interest expenses
	Credigy	35		36		(3)
	ABA Bank	65		61		7
	International	−		1
		100		98		2
Income before provisions for credit losses and income taxes		226		221		2
Provisions for credit losses
	Credigy	25		31		(19)
	ABA Bank	11		4
		36		35		3
Income before income taxes		190		186		2
Income taxes
	Credigy	14		15		(7)
	ABA Bank	25		24		4
	International	1		−
		40		39		3
Net income
	Credigy	51		55		(7)
	ABA Bank	93		91		2
	International	6		1
		150		147		2
Average assets⁽¹⁾		26,025		21,606		20
Average loans and receivables⁽¹⁾		20,787		17,941		16
Purchased or originated credit-impaired (POCI) loans		457		414		10
Net impaired loans excluding POCI loans⁽²⁾		329		172		91
Average deposits⁽¹⁾		12,174		9,813		24
Efficiency ratio⁽²⁾		30.7	%	30.7	%

(1) Represents an average of the daily balances for the period.

(2) See the Glossary section on pages 43 to 46 for details on the composition of these measures.

In the USSF&I segment, net income totalled $150 million in the first quarter of 2024, up 2% from $147 million in the same quarter of 2023. The segment's first-quarter total revenues amounted to $326 million versus $319 million in the first quarter of 2023, a $7 million or 2% year-over-year increase that was driven mainly by 8% revenue growth at the ABA Bank subsidiary as well as by annual dividend income from an investment in a financial group recorded in the first quarter of 2024. These items were partly offset by a 9% decrease in the Credigy subsidiary's revenues.

Credigy

The Credigy subsidiary's net income totalled $51 million in the first quarter of 2024, down $4 million or 7% year over year. Its first-quarter total revenues amounted to $125 million versus $137 million in the first quarter of 2023, a year-over-year decrease that mainly reflects revenues recorded upon a credit facility prepayment in the first quarter of 2023, partly offset by growth in non-interest income arising mainly from the fair value remeasurement of certain portfolios. Credigy's first-quarter non-interest expenses stood at $35 million, a $1 million year-over-year decrease. First-quarter provisions for credit losses were down $6 million year over year. A decrease in provisions for credit losses on non-impaired loans was due to an improvement in certain risk parameters. In addition, provisions for credit losses on POCI loans were also down year over year due to higher unfavourable remeasurements of certain portfolios during the first quarter of 2023. These decreases were partly offset by an increase in provisions for credit losses on impaired loans.

ABA Bank

The ABA Bank subsidiary's net income totalled $93 million in the first quarter of 2024, up $2 million or 2% year over year. The subsidiary's first-quarter total revenues rose 8% year over year, mainly due to sustained asset growth, partly offset by higher interest expenses on deposits. Non-interest expenses for the first quarter of 2024 stood at $65 million, a $4 million or 7% year-over-year increase that was mainly attributable to higher occupancy expenses resulting from the subsidiary's business growth and opening of new branches. Provisions for credit losses, which stood at $11 million in the first quarter of 2024, rose $7 million year over year. This increase came from higher provisions for credit losses on impaired loans, partly offset by lower provisions for credit losses on non-impaired loans.

Other

(millions of Canadian dollars)	Quarter ended January 31
	2024	2023
Operating results
Net interest income⁽¹⁾	(100)	(142)
Non-interest income⁽¹⁾	(85)	(45)
Total revenues	(185)	(187)
Non-interest expenses	31	48
Income before provisions for credit losses and income taxes	(216)	(235)
Provisions for credit losses	(4)	(1)
Income before income taxes	(212)	(234)
Income taxes (recovery)⁽¹⁾	(141)	(141)
Net loss	(71)	(93)
Non-controlling interests	−	−
Net income (loss) attributable to the Bank's shareholders and holders of other equity instruments	(71)	(93)
Less: Specified items after income taxes⁽²⁾	−	(24)
Net loss - Adjusted⁽²⁾	(71)	(69)
Average assets⁽³⁾	62,459	75,424

(1) For the quarter ended January 31, 2024, an amount of $37 million ($78 million in 2023) was deducted from Net interest income, an amount of $73 million ($52 million in 2023) was deducted from Non-interest income, and an equivalent amount was recorded in Income taxes (recovery). These adjustments include a reversal of the taxable equivalent of the Financial Markets segment and the Other heading. Taxable equivalent basis is a calculation method that consists in grossing up certain revenues taxed at lower rates by the income tax to a level that would make it comparable to revenues from taxable sources in Canada. In light of the proposed legislation with respect to Canadian dividends, the Bank did not either recognize an income tax deduction or use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see the Income Taxes section).

(2) See the Financial Reporting Method section on pages 4 to 8 for additional information on non-GAAP financial measures.

(3) Represents an average of the daily balances for the period.

For the Other heading of segment results, there was a net loss of $71 million in the first quarter of 2024 compared to a net loss of $93 million in the first quarter of 2023. The change in net loss was mainly due to a $24 million income tax expense related to the Canadian government's 2022 tax measures recorded in the first quarter of 2023. There was a net loss of $71 million in the first quarter of 2024 versus an adjusted net loss of $69 million in the first quarter of 2023.

Consolidated Balance Sheet

Consolidated Balance Sheet Summary

(millions of Canadian dollars)	As at January 31, 2024	As at October 31, 2023⁽¹⁾	% Change
Assets
Cash and deposits with financial institutions	37,399	35,234	6
Securities	130,065	121,818	7
Securities purchased under reverse repurchase agreements and securities borrowed	12,926	11,260	15
Loans and acceptances, net of allowances	230,157	225,443	2
Other	23,380	29,722	(21)
	433,927	423,477	2
Liabilities and equity
Deposits	300,097	288,173	4
Other	109,180	110,972	(2)
Subordinated debt	749	748	−
Equity attributable to the Bank's shareholders and holders of other equity instruments	23,899	23,582	1
Non-controlling interests	2	2	−
	433,927	423,477	2

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

Assets

As at January 31, 2024, the Bank had total assets of $433.9 billion, a $10.4 billion or 2% increase from $423.5 billion as at October 31, 2023. At $37.4 billion as at January 31, 2024, cash and deposits with financial institutions rose $2.2 billion, mainly due to an increase in deposits with the Bank of Canada, partly offset by a decrease in deposits with regulated financial institutions.

Since October 31, 2023, securities rose $8.3 billion due to a $5.5 billion or 5% increase in securities at fair value through profit or loss, with this increase being essentially attributable to equity securities, partly offset by a decrease in securities issued or guaranteed by U.S. Treasury, other U.S. agencies, and other foreign governments. The increase was also due to a $2.8 billion increase in securities other than those measured at fair value through profit or loss, with this increase being essentially attributable to securities issued or guaranteed by the Canadian government and securities issued or guaranteed by U.S. Treasury, other U.S. agencies, and other foreign governments. Securities purchased under reverse repurchase agreements and securities borrowed increased by $1.6 billion since October 31, 2023, mainly due to the activities of the Financial Markets segment and Treasury.

Totalling $230.2 billion as at January 31, 2024, loans and acceptances, net of allowances for credit losses, rose $4.8 billion or 2% since October 31, 2023. The following table provides a breakdown of the main loan and acceptance portfolios.

(millions of Canadian dollars)	As at January 31, 2024	As at October 31, 2023	As at January 31, 2023
Loans and acceptances
Residential mortgage and home equity lines of credit	117,883	116,444	111,634
Personal	16,948	16,761	15,537
Credit card	2,541	2,603	2,296
Business and government	93,996	90,819	81,919
	231,368	226,627	211,386
Allowances for credit losses	(1,211)	(1,184)	(1,007)
	230,157	225,443	210,379

Since October 31, 2023, residential mortgages (including home equity lines of credit) rose $1.5 billion or 1% given the business activities of the Personal and Commercial segment, the Financial Markets segment, and the Credigy subsidiary. Also since October 31, 2023, personal loans grew slightly, credit card receivables were down slightly, while loans and acceptances to business and government rose $3.2 billion or 3%, mainly due to business growth at Commercial Banking, in the Financial Markets segment, and at the Credigy and ABA Bank subsidiaries.

Since January 31, 2023, loans and acceptances, net of allowances for credit losses, grew $19.8 billion or 9%, while residential mortgages (including home equity lines of credit) rose $6.3 billion or 6% given sustained demand for mortgage credit in the Personal and Commercial segment and given business growth in the Financial Markets segment and at the ABA Bank and Credigy subsidiaries. Also since January 31, 2023, personal loans rose $1.4 billion, credit card receivables were up $0.2 billion, and loans and acceptances to business and government grew $12.1 billion or 15%, owing essentially to the activities of the Financial Markets segment, Commercial Banking, and ABA Bank.

Impaired loans include all loans classified in Stage 3 of the expected credit loss model and POCI loans. As at January 31, 2024, gross impaired loans stood at $1,599 million compared to $1,584 million as at October 31, 2023. As for net impaired loans, they totalled $1,276 million as at January 31, 2024 and are stable compared to October 31, 2023. Net impaired loans excluding POCI loans amounted to $677 million as at January 31, 2024, rising $71 million from $606 million as at October 31, 2023. This increase was due to an increase in the net impaired loans of the loan portfolios of Personal Banking and Commercial Banking and of the Credigy (excluding POCI loans) and ABA Bank subsidiaries, partly offset by a decrease in the net impaired loans of the loan portfolios of the Wealth Management and Financial Markets segments. Net POCI loans stood at $599 million as at January 31, 2024 compared to $670 million as at October 31, 2023, a decrease due to the maturities of certain portfolios and to loan repayments.

As at January 31, 2024, other assets totalled $23.4 billion, a $6.3 billion decrease since October 31, 2023 that came mainly from a decrease in derivative financial instruments.

Liabilities

As at January 31, 2024, the Bank had total liabilities of $410.0 billion compared to $399.9 billion as at October 31, 2023.

The Bank's total deposit liability stood at $300.1 billion as at January 31, 2024, rising $11.9 billion or 4% from $288.2 billion as at October 31, 2023. As at January 31, 2024, personal deposits stood at $91.1 billion, rising $3.2 billion since October 31, 2023. This increase came from business growth in the Financial Markets segment, the Wealth Management segment, at Personal Banking, and at ABA Bank.

Business and government deposits stood at $204.4 billion as at January 31, 2024, rising $7.1 billion since October 31, 2023. This increase came from the financing activities of the Financial Markets segment and Treasury, including $2.0 billion in deposits subject to bank recapitalization (bail-in) conversion regulations. Deposits from deposit-taking institutions stood at $4.6 billion as at January 31, 2024, increasing $1.6 billion since October 31, 2023.

Other liabilities, totalling $109.2 billion as at January 31, 2024, decreased by $1.8 billion since October 31, 2023, resulting essentially from a $2.9 billion decrease in derivative financial instruments and a $1.0 billion decrease in obligations related to securities sold under repurchase agreements and securities loaned. These decreases were partly offset by a $2.5 billion increase in obligations related to securities sold short.

Equity

As at January 31, 2024, equity attributable to the Bank's shareholders and holders of other equity instruments was $23.9 billion, rising $0.3 billion since October 31, 2023. This increase was due to net income net of dividends and to issuances of common shares under the stock option plan. These increases were partly offset by a decrease in accumulated other comprehensive income, notably foreign exchange losses, and by the net fair value change attributable to the credit risk on financial liabilities designated at fair value through profit or loss.

Event After the Consolidated Balance Sheet Date

Issuance of Subordinated Debt

On February 5, 2024, the Bank issued medium-term notes for a total amount of $500 million. They bear interest at 5.279% and mature on February 15, 2034. The interest on these notes will be payable semi-annually at a rate of 5.279% per annum until February 15, 2029 and, thereafter, will be payable quarterly at a floating rate equal to Daily Compounded CORRA plus 1.80%. With the prior approval of OSFI, the Bank may, at its option, redeem these notes as of February 15, 2029, in whole or in part, at their nominal value plus accrued and unpaid interest. Given that the medium-term notes satisfy the non-viability contingent capital requirements, they qualify for the purposes of calculating regulatory capital under Basel III.

Related Party Transactions

The Bank's policies and procedures regarding related party transactions have not significantly changed since October 31, 2023. For additional information, see Note 28 to the audited annual consolidated financial statements for the year ended October 31, 2023.

Securitization and Off-Balance-Sheet Arrangements

In the normal course of business, the Bank is party to various financial arrangements that, under IFRS, are not required to be recorded on the Consolidated Balance Sheet or are recorded under amounts other than their notional or contractual values. These arrangements include, among others, transactions with structured entities, derivative financial instruments, issuances of guarantees, credit instruments, and financial assets received as collateral. A complete analysis of these types of arrangements, including their nature, business purpose, and importance, is provided on pages 51 and 52 of the 2023 Annual Report.

For additional information on financial assets transferred but not derecognized, guarantees, commitments, and structured entities, see Notes 8, 26, and 27 to the audited annual consolidated financial statements for the year ended October 31, 2023.

Income Taxes

Notice of Assessment

In March 2023, the Bank was reassessed by the Canada Revenue Agency (CRA) for additional income tax and interest of approximately $90 million (including estimated provincial tax and interest) in respect of certain Canadian dividends received by the Bank during the 2018 taxation year.

In prior fiscal years, the Bank had been reassessed for additional income tax and interest of approximately $875 million (including provincial tax and interest) in respect of certain Canadian dividends received by the Bank during the 2012-2017 taxation years.

In the reassessments, the CRA alleges that the dividends were received as part of a "dividend rental arrangement".

In October 2023, the Bank filed a notice of appeal with the Tax Court of Canada, and the matter is now in litigation. The CRA may issue reassessments to the Bank for taxation years subsequent to 2018 in regard to certain activities similar to those that were the subject of the above-mentioned reassessments. The Bank remains confident that its tax position was appropriate and intends to vigorously defend its position. As a result, no amount has been recognized in the consolidated financial statements as at January 31, 2024.

Canadian Government's 2022 Tax Measures

On November 4, 2022, the Government of Canada introduced Bill C-32 - An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 3, 2022 and certain provisions of the budget tabled in Parliament on April 7, 2022 to implement tax measures applicable to certain entities of banking and life insurer groups, as presented in its April 7, 2022 budget. These tax measures included the Canada Recovery Dividend (CRD), which is a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as a 1.5% increase in the statutory tax rate. On December 15, 2022, Bill C-32 received royal assent. Given that these tax measures were in effect as at January 31, 2023, a $32 million tax expense for the CRD and an $8 million tax recovery for the tax rate increase, including the impact related to current and deferred taxes for fiscal 2022, were recognized in the consolidated financial statements for the quarter ended January 31, 2023.

Proposed Legislation

On November 30, 2023, the Government of Canada introduced Bill C-59 - An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023 to implement tax measures applicable to the Bank. The measures include the denial of the deduction in respect of dividends received after 2023 on shares that are mark-to-market property for tax purposes (except for dividends received on "taxable preferred shares" as defined in the Income Tax Act), as well as the application of a 2% tax on the net value of equity repurchases occurring as of January 1, 2024. Although these tax measures were not substantively enacted at the reporting date, the consolidated financial statements reflect, since January 1, 2024, the denial of the deduction in respect of the dividends covered by Bill C-59.

During fiscal 2023, the Government of Canada proposed to implement the Pillar 2 rules (global minimum tax) published by the Organisation for Economic Co-operation and Development (OECD) that will apply to fiscal years beginning on or after December 31, 2023 (November 1, 2024 for the Bank). To date, the Pillar 2 rules have not yet been included in a bill in Canada but have been included in a bill or enacted in certain jurisdictions where the Bank operates. The Pillar 2 rules do not apply to this fiscal year, and the Bank is currently assessing its income tax exposure arising from these rules.

Capital Management

Capital management has a dual role of ensuring a competitive return to the Bank's shareholders while maintaining a solid capital foundation that covers the risks inherent to the Bank's business activities, supports its business segments, and protects its clients. The Bank's capital management policy defines the guiding principles as well as the roles and responsibilities of its internal capital adequacy assessment process. This process aims to determine the capital that the Bank needs to maintain to pursue its business activities and accommodate unexpected losses arising from extremely adverse economic and operational conditions. For additional information on the capital management framework, see the Capital Management section on pages 53 to 61 of the Bank's 2023 Annual Report.

Basel Accord

The Bank and all other major Canadian banks have to maintain the following minimum capital ratios established by OSFI: a CET1 capital ratio of at least 11.5%, a Tier 1 capital ratio of at least 13.0%, and a Total capital ratio of at least 15.0%. For additional information on the ratio calculations, see pages 54 and 55 of the 2023 Annual Report. All of these ratios include a capital conservation buffer of 2.5% established by the BCBS and OSFI, a 1.0% surcharge applicable solely to Domestic Systemically Important Banks (D‑SIBs), and a 3.5% domestic stability buffer (DSB) established by OSFI. The DSB, which can vary from 0% to 4.0% of risk-weighted assets (RWA), consists exclusively of CET1 capital. A D-SIB that fails to meet this buffer requirement will not be subject to automatic constraints to reduce capital distributions but will have to provide a remediation plan to OSFI. The Bank must also meet the requirements of the capital output floor that will ensure that its total calculated RWA is not below 72.5% of the total RWA as calculated under the Basel III Standardized Approaches. OSFI is allowing a phase-in of the floor factor over three years, starting at 65.0% in the second quarter of 2023 and rising 2.5% per year to reach 72.5% in fiscal 2026. For fiscal 2024, the floor factor is set at 67.5%. If the capital requirement is less than the capital output floor requirement after applying the floor factor, the difference is added to the total RWA. Lastly, OSFI requires D-SIBs to maintain a Basel III leverage ratio of at least 3.5%, which includes a Tier 1 capital buffer of 0.5% applicable only to D-SIBs. For additional information on the leverage ratio calculation, see page 55 of the 2023 Annual Report.

In the first quarter of 2024, the Bank implemented OSFI's finalized guidance of the revised market risk framework, consistent with the BCBS's Fundamental Review of the Trading Book (FRTB) as well as the revised credit valuation adjustment (CVA) risk framework. For both market risk and CVA, the Bank uses the sensitivities-based Standardized Approach (SA) for computing RWA. The implementation of these revised frameworks, on November 1, 2023, had a negative impact of 38 bps on the Bank's CET1 capital ratio.

In addition, OSFI requires that regulatory capital instruments other than common equity must have a non-viability contingent capital (NVCC) clause to ensure that investors bear losses before taxpayers should the government determine that rescuing a non-viable financial institution is in the public interest. The Bank's regulatory capital instruments, other than common shares, all have an NVCC clause.

OSFI's Total Loss Absorbing Capacity (TLAC) Guideline, which applies to all D-SIBs under the federal government's bail-in regulations, is to ensure that a D-SIB has sufficient loss-absorbing capacity to support its internal recapitalization in the unlikely event it becomes non-viable. Available TLAC includes total capital as well as certain senior unsecured debts that satisfy all of the eligibility criteria of OSFI's TLAC guideline. OSFI requires D-SIBs to maintain a risk-based TLAC ratio of at least 25.0% (including the DSB) of risk-weighted assets and a TLAC leverage ratio of at least 7.25%. The TLAC ratio is calculated by dividing available TLAC by risk‑weighted assets, and the TLAC leverage ratio is calculated by dividing available TLAC by total exposure. As at January 31, 2024, outstanding liabilities of $19.7 billion ($17.7 billion as at October 31, 2023) were subject to conversion under the bail-in regulations.

Requirements - Regulatory Capital⁽¹⁾, Leverage⁽¹⁾, and TLAC⁽²⁾ Ratios

								Requirements as at January 31, 2024								Ratios as at January 31, 2024
		Minimum		Capital conservation buffer		Minimum set by BCBS		D-SIB surcharge		Minimum set by OSFI⁽³⁾		Domestic stability buffer⁽⁴⁾		Minimum set by OSFI⁽³⁾, including the domestic stability buffer
		Minimum		Capital conservation buffer		Minimum set by BCBS		D-SIB surcharge		Minimum set by OSFI⁽³⁾		Domestic stability buffer⁽⁴⁾
Capital ratios
	CET1	4.5	%	2.5	%	7.0	%	1.0	%	8.0	%	3.5	%	11.5	%	13.1	%
	Tier 1	6.0	%	2.5	%	8.5	%	1.0	%	9.5	%	3.5	%	13.0	%	15.5	%
	Total	8.0	%	2.5	%	10.5	%	1.0	%	11.5	%	3.5	%	15.0	%	16.2	%
Leverage ratio		3.0	%	n.a.		3.0	%	0.5	%	3.5	%	n.a.		3.5	%	4.3	%
TLAC ratio		21.5	%	n.a.		21.5	%	n.a.		21.5	%	3.5	%	25.0	%	28.1	%
TLAC leverage ratio		6.75	%	n.a.		6.75	%	0.5	%	7.25	%	n.a.		7.25	%	7.8	%

n.a. Not applicable

(1) The capital ratios and the leverage ratio are calculated in accordance with the Basel III rules, as set out in OSFI's Capital Adequacy Requirements Guideline and Leverage Requirements Guideline.

(2) The TLAC ratio and the TLAC leverage ratio are calculated in accordance with OSFI's Total Loss Absorbing Capacity Guideline.

(3) The capital ratios and the TLAC ratio include the capital conservation buffer and the D-SIB surcharge. The minimum leverage ratio and the TLAC leverage ratio include a Tier 1 capital buffer of 0.5% (surcharge related to D-SIBs).

(4) On December 8, 2023, OSFI confirmed that the domestic stability buffer was being maintained at 3.5%.

The Bank ensures that its capital levels are always above the minimum capital requirements set by OSFI, including the DSB. By maintaining a strong capital structure, the Bank can cover the risks inherent to its business activities, support its business segments, and protect its clients.

Other disclosure requirements pursuant to Pillar 3 of the Basel Accord and a set of recommendations defined by the Enhanced Disclosure Task Force (EDTF) are presented in the Supplementary Regulatory Capital and Pillar 3 Disclosure report published quarterly and available on the Bank's website at nbc.ca. Furthermore, a complete list of capital instruments and their main features is also available on the Bank's website.

Regulatory Developments

The Bank closely monitors regulatory developments and participates actively in various consultative processes. During the first quarter of 2024, the Bank implemented the revised market risk and CVA risk frameworks. Since November 1, 2023, there have been no other new regulatory developments to be considered.

Management Activities

On December 12, 2023, the Bank began a normal course issuer bid to repurchase for cancellation up to 7,000,000 common shares (representing approximately 2.1% of its then outstanding common shares) over the 12-month period ending no later than December 11, 2024. During the quarter ended January 31, 2024, the Bank did not repurchase any common shares.

On February 5, 2024, the Bank issued medium-term notes for a total amount of $500 million bearing interest at 5.279% and maturing on February 15, 2034. Given that the medium-term notes satisfy the NVCC requirements, they qualify for the purposes of calculating regulatory capital under the Basel III rules and will be included in the capital ratio calculations as of the second quarter of 2024.

Dividends

On February 27, 2024, the Board of Directors declared regular dividends on the various series of first preferred shares and a dividend of $1.06 per common share, payable on May 1, 2024 to shareholders of record on March 25, 2024.

Shares, Other Equity Instruments, and Stock Options

		As at January 31, 2024
		Number of shares or LRCN⁽¹⁾	$ million
First preferred shares
	Series 30	14,000,000	350
	Series 32	12,000,000	300
	Series 38	16,000,000	400
	Series 40	12,000,000	300
	Series 42	12,000,000	300
		66,000,000	1,650
Other equity instruments
	LRCN - Series 1	500,000	500
	LRCN - Series 2	500,000	500
	LRCN - Series 3	500,000	500
		1,500,000	1,500
		67,500,000	3,150
Common shares		339,166,350	3,347
Stock options		11,892,260

(1) Limited Recourse Capital Notes (LRCN).

As at February 23, 2024, there were 339,170,523 common shares and 11,838,014 stock options outstanding. NVCC provisions require the conversion of capital instruments into a variable number of common shares should OSFI deem a bank to be non-viable or should the government publicly announce that a bank has accepted or agreed to accept a capital injection. If an NVCC trigger event were to occur, all of the Bank's preferred shares, LRCNs, and medium-term notes maturing on August 16, 2032, which are NVCC capital instruments, would be converted into common shares of the Bank according to an automatic conversion formula at a conversion price corresponding to the greater of the following amounts: (i) a $5.00 contractual floor price; or (ii) the market price of the Bank's common shares on the date of the trigger event (10-day weighted average price). Based on a $5.00 floor price and including an estimate for accrued dividends and interest, these NVCC capital instruments would be converted into a maximum of 870 million Bank common shares, which would have a 71.9% dilutive effect based on the number of Bank common shares outstanding as at January 31, 2024.

Movement in Regulatory Capital⁽¹⁾

(millions of Canadian dollars)			Quarter ended January 31, 2024
Common Equity Tier 1 (CET1) capital
Balance at beginning			16,920
	Issuance of common shares (including Stock Option Plan)		45
	Impact of shares purchased or sold for trading		2
	Repurchase of common shares		−
	Other contributed surplus		1
	Dividends on preferred and common shares and distributions on other equity instruments		(402)

	Net income attributable to the Bank's shareholders and holders of other equity instruments		922
	Removal of own credit spread (net of income taxes)		220
	Impact of IFRS 17 adoption		(94)
	Other		(128)

	Movements in accumulated other comprehensive income
		Translation adjustments	(174)
		Debt securities at fair value through other comprehensive income	48
		Other	−
	Change in goodwill and intangible assets (net of related tax liability)		26
	Other, including regulatory adjustments
		Change in defined benefit pension plan asset (net of related tax liability)	(31)
		Change in amount exceeding 15% threshold
		Deferred tax assets	−
		Significant investment in common shares of financial institutions	−
		Deferred tax assets, unless they result from temporary differences (net of related tax liability)	(3)
		Other deductions or regulatory adjustments to CET1 implemented by OSFI	(2)
		Change in other regulatory adjustments	−
Balance at end			17,350
Additional Tier 1 capital
Balance at beginning			3,148
	New Tier 1 eligible capital issuances		−
	Redeemed capital		−
	Other, including regulatory adjustments		−
Balance at end			3,148
Total Tier 1 capital			20,498
Tier 2 capital
Balance at beginning			988
	New Tier 2 eligible capital issuances		−
	Redeemed capital		−
	Tier 2 instruments issued by subsidiaries and held by third parties		−
	Change in certain allowances for credit losses		(59)
	Other, including regulatory adjustments		(4)
Balance at end			925
Total regulatory capital			21,423

(1) See the Financial Reporting Method section on pages 4 to 8 for additional information on capital management measures.

Risk-Weighted Assets by Key Risk Drivers

Risk-weighted assets (RWA) amounted to $132.4 billion as at January 31, 2024 compared to $125.6 billion as at October 31, 2023, a $6.8 billion increase resulting from organic growth in RWA, a deterioration in the credit quality of the loan portfolio, and methodology changes mainly related to the implementation of OSFI's revised market risk and CVA risk frameworks, partly offset by foreign exchange movements. The changes in the Bank's RWA by risk type are presented in the following table.

Movement of Risk-Weighted Assets by Key Drivers⁽¹⁾

(millions of Canadian dollars)			Quarter ended
		January 31, 2024			October 31, 2023
		Non-counterparty credit risk	Counterparty credit risk	Total	Total
Credit risk - Risk-weighted assets at beginning		99,808	7,337	107,145	102,087
	Book size	4,246	774	5,020	2,288
	Book quality	438	(3)	435	1,045
	Model updates	(31)	−	(31)	(107)
	Methodology and policy	(825)	(1,804)	(2,629)	−
	Acquisitions and disposals	−	−	−	−
	Foreign exchange movements	(997)	(105)	(1,102)	1,832
Credit risk - Risk-weighted assets at end		102,639	6,199	108,838	107,145
Market risk - Risk-weighted assets at beginning				5,662	5,985
	Movement in risk levels⁽²⁾			(352)	(323)
	Model updates			−	−
	Methodology and policy			4,838	−
	Acquisitions and disposals			−	−
Market risk - Risk-weighted assets at end				10,148	5,662
Operational risk - Risk-weighted assets at beginning				12,785	12,490
	Movement in risk levels			599	295
	Methodology and policy			−	−
	Acquisitions and disposals			−	−
Operational risk - Risk-weighted assets at end				13,384	12,785

Risk-weighted assets at end				132,370	125,592

(1) See the Financial Reporting Method section on pages 4 to 8 for additional information on capital management measures.

(2) Also includes foreign exchange rate movements that are not considered material.

The table above provides risk-weighted asset movements by the key drivers underlying the different risk categories.

The Book size item reflects organic changes in book size and composition (including new loans and maturing loans). RWA movements attributable to book size include increases or decreases in exposures, measured by exposure at default, assuming a stable risk profile.

The Book quality item is the Bank's best estimate of changes in book quality related to experience, such as underlying customer behaviour or demographics, including changes resulting from model recalibrations or realignments and also including risk mitigation factors.

The Model updates item is used to reflect implementations of new models, changes in model scope, and any other change applied to address model malfunctions.

The Methodology and policy item presents the impact of changes in calculation methods resulting from changes in regulatory policies or from new regulations. During the first quarter of 2024, the Bank refined the credit risk RWA calculation related to derivatives and certain non-retail exposures. The Bank also implemented OSFI's revised market risk and CVA risk frameworks.

Regulatory Capital Ratios, Leverage Ratio, and TLAC Ratios

As at January 31, 2024, the Bank's CET1, Tier 1, and Total capital ratios were, respectively, 13.1%, 15.5%, and 16.2% compared to ratios of, respectively, 13.5%, 16.0%, and 16.8% as at October 31, 2023. All of the capital ratios decreased since October 31, 2023, essentially due to RWA growth and to the impact of implementing OSFI's revised market risk and CVA risk frameworks. These factors were partly offset by the positive contribution from net income, net of dividends, and common share issuances under the Stock Option Plan.

As at January 31, 2024, the leverage ratio was 4.3% compared to 4.4% as at October 31, 2023. The decrease in the leverage ratio was essentially due to growth in total exposure, partly offset by growth in Tier 1 capital.

As at January 31, 2024, the Bank's TLAC ratio and TLAC leverage ratio were, respectively, 28.1% and 7.8% compared to 29.2% and 8.0%, respectively, as at October 31, 2023. The decrease in the TLAC ratio is explained by the same factors described for the capital ratios, partly offset by net issuances of instruments that met the TLAC eligibility criteria during the period. The decrease in the TLAC leverage ratio was due to the same factors as those provided for the leverage ratio, partly offset by the net TLAC instrument issuances.

During the quarter ended January 31, 2024, the Bank was compliant with all of OSFI's regulatory capital, leverage, and TLAC requirements.

Regulatory Capital⁽¹⁾, Leverage Ratio⁽¹⁾ and TLAC⁽²⁾

(millions of Canadian dollars)		As at January 31, 2024		As at October 31, 2023
Capital
	CET1	17,350		16,920
	Tier 1	20,498		20,068
	Total	21,423		21,056
Risk-weighted assets		132,370		125,592
Total exposure		478,484		456,478
Capital ratios
	CET1	13.1	%	13.5	%
	Tier 1	15.5	%	16.0	%
	Total	16.2	%	16.8	%
Leverage ratio		4.3	%	4.4	%
Available TLAC		37,162		36,732
TLAC ratio		28.1	%	29.2	%
TLAC leverage ratio		7.8	%	8.0	%

(1) Capital, risk-weighted assets, total exposure, the capital ratios, and the leverage ratio are calculated in accordance with the Basel III rules, as set out in OSFI's Capital Adequacy Requirements Guideline and Leverage Requirements Guideline.

(2) Available TLAC, the TLAC ratio, and the TLAC leverage ratio are calculated in accordance with OSFI's Total Loss Absorbing Capacity Guideline.

Public Disclosure Requirements for Global Systemically Important Banks

The BCBS developed an assessment methodology and additional loss absorbency requirements as well as indicators to be used by the BCBS and the Financial Stability Board to evaluate Global Systemically Important Banks (G-SIBs). The annual public disclosure requirements apply to large, globally active banks.

The most recent version of OSFI's advisory entitled Global Systemically Important Banks - Public Disclosure Requirements regarding implementation of public disclosure requirements for G-SIBs in Canada took effect in 2022. Canadian banks, including the Bank, that have not been designated as G‑SIBs and that have total exposure (as calculated using the Basel III leverage ratio) greater than 200 billion euros at fiscal year-end must publish the indicators annually. The indicators are calculated and presented in accordance with specific BCBS guidance, which is updated annually. Consequently, the values obtained may not be comparable to the other measures presented in this report. The following table presents the indicators used in the BCBS's assessment methodology for evaluating G-SIBs.

Indicators - Global Systemically Important Banks (G-SIBs)⁽¹⁾

(millions of Canadian dollars)		As at October 31
Category	Indicators	2023	2022
Cross-jurisdictional activity⁽²⁾	Cross-jurisdictional claims	117,016	97,929
	Cross-jurisdictional liabilities	90,476	75,961
Size⁽³⁾	Total exposures as defined for use in the Basel III leverage ratio⁽⁴⁾	459,090	429,692
Interconnectedness⁽⁵⁾	Intra-financial system assets⁽⁴⁾	73,022	66,590
	Intra-financial system liabilities⁽⁴⁾	38,238	42,806
	Securities outstanding⁽⁴⁾	109,831	105,572
Substitutability / financial institutions infrastructure⁽⁶⁾	Payment activity⁽⁷⁾	16,801,902	17,366,801
	Assets under custody	652,463	615,973
	Underwritten transactions in debt and equity markets	31,821	26,017
	Trading volume⁽⁸⁾
	Fixed-income securities⁽⁸⁾	845,554	829,877
	Equities and other securities⁽⁸⁾	1,124,984	1,335,166
Complexity⁽⁹⁾	Notional amount of over-the-counter derivative financial instruments⁽⁴⁾	1,847,636	1,816,770
	Trading and investment securities	63,407	49,493
	Level 3 financial assets⁽⁴⁾	1,226	1,128

(1) The G-SIB indicators are prepared using the methodology prescribed in the BCBS guidelines published in July 2018 and are calculated using the specific instructions updated by the BCBS each year.

(2) Represents the Bank's level of interaction outside Canada.

(3) Represents the Bank's total on-and-off balance sheet exposures, as determined by OSFI's Basel III leverage ratio rules before regulatory adjustments.

(4) Includes insurance activities.

(5) Represents transactions with other financial institutions.

(6) Represents the extent to which the Bank's services could be substituted by other institutions.

(7) For the fiscal years ended October 31, 2023 and 2022.

(8) This indicator consists of two sub-indicators: fixed-income securities as well as equities and other securities.

(9) Includes the level of complexity and volume of the Bank's trading activities represented through derivative financial instruments, trading securities, investment securities, and Level 3 financial assets.

Risk Management

Risk-taking is intrinsic to a financial institution's business. The Bank views risk as an integral part of its development and the diversification of its activities. It advocates a risk management approach that is consistent with its business strategy. The Bank voluntarily exposes itself to certain risk categories, particularly credit and market risk, in order to generate revenue. It also assumes certain risks that are inherent to its activities-to which it does not choose to expose itself-and that do not generate revenue, i.e., mainly operational risks.

Despite the exercise of stringent risk management and existing mitigation measures, risk cannot be eliminated entirely, and residual risks may occasionally cause losses. Certain risks are discussed hereafter. For additional information, see the Risk Management section on pages 62 to 106 of the 2023 Annual Report. Risk management information is also provided in Note 6 to these consolidated financial statements, which covers loans.

Credit Risk

Credit risk is the risk of incurring a financial loss if an obligor does not fully honour its contractual commitments to the Bank. Obligors may be debtors, issuers, counterparties, or guarantors. Credit risk is the most significant risk facing the Bank in the normal course of business.

Between March 2, 2022 and July 12, 2023, the Bank of Canada raised its policy rate ten times; the rate has thus risen from 0.25% to 5%. For the announcements of December 6, 2023 and January 24, 2024, the central bank opted for a pause, holding the policy rate steady. This rapid increase in rates, undertaken primarily to counter inflation in Canada, is putting pressure on the ability of borrowers to make payments, notably borrowers with variable-rate mortgages or for whom the mortgage term is up for renewal.

Regulatory Developments

The Bank closely monitors regulatory developments and participates actively in various consultative processes. For additional information about the regulatory context on October 31, 2023, see page 77 of the Risk Management section of the 2023 Annual Report. In addition, since November 1, 2023, the below-described regulatory development should also be considered.

On February 5, 2024, the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which was to be in effect until January 1, 2025, was extended until January 1, 2027.

The amounts in the following tables represent the Bank's maximum exposure to credit risk as at the financial reporting date without considering any collateral held or any other credit enhancements. These amounts do not include allowances for credit losses nor amounts pledged as collateral. The tables also exclude equity securities.

Maximum Credit Risk Exposure Under the Basel Asset Categories⁽¹⁾

(millions of Canadian dollars)		As at January 31, 2024
		Drawn⁽²⁾	Undrawn commitments	Repo-style transactions⁽³⁾	Derivative financial instruments	Other off-balance- sheet items⁽⁴⁾	Total	Standardized Approach⁽⁵⁾		IRB Approach
Retail
	Residential mortgages	76,847	9,145	−	−	−	85,992	12	%	88	%
	Qualifying revolving retail	3,106	12,290	−	−	−	15,396	−	%	100	%
	Other retail	16,490	2,742	−	−	32	19,264	14	%	86	%
		96,443	24,177	−	−	32	120,652
Non-retail
	Corporate	93,299	29,754	42,021	313	8,034	173,421	18	%	82	%
	Sovereign	66,682	5,989	70,700	−	288	143,659	2	%	98	%
	Financial institutions	6,849	1,000	103,224	1,752	1,404	114,229	22	%	78	%
		166,830	36,743	215,945	2,065	9,726	431,309
Trading portfolio		−	−	−	14,618	−	14,618	2	%	98	%
Securitization		4,628	−	−	−	5,321	9,949	92	%	8	%
Total - Gross credit risk		267,901	60,920	215,945	16,683	15,079	576,528	14	%	86	%
Standardized Approach⁽⁵⁾		36,059	1,274	36,502	1,731	5,564	81,130
IRB Approach		231,842	59,646	179,443	14,952	9,515	495,398
Total - Gross credit risk		267,901	60,920	215,945	16,683	15,079	576,528	14	%	86	%


(millions of Canadian dollars)		As at October 31, 2023
		Drawn⁽²⁾	Undrawn commitments	Repo-style transactions⁽³⁾	Derivative financial instruments	Other off-balance- sheet items⁽⁴⁾	Total	Standardized Approach⁽⁵⁾		IRB Approach
Retail
	Residential mortgages	77,073	9,094	−	−	−	86,167	12	%	88	%
	Qualifying revolving retail	3,183	12,052	−	−	−	15,235	−	%	100	%
	Other retail	16,078	2,692	−	−	33	18,803	13	%	87	%
		96,334	23,838	−	−	33	120,205
Non-retail
	Corporate	91,994	27,846	38,549	385	6,915	165,689	18	%	82	%
	Sovereign	61,438	5,921	61,580	−	267	129,206	3	%	97	%
	Financial institutions	6,719	1,002	98,222	3,013	1,506	110,462	23	%	77	%
		160,151	34,769	198,351	3,398	8,688	405,357
Trading portfolio		−	−	−	13,778	−	13,778	2	%	98	%
Securitization		4,351	−	−	−	5,318	9,669	92	%	8	%
Total - Gross credit risk		260,836	58,607	198,351	17,176	14,039	549,009	15	%	85	%
Standardized Approach⁽⁵⁾		35,461	1,260	34,717	3,211	5,568	80,217
IRB Approach		225,375	57,347	163,634	13,965	8,471	468,792
Total - Gross credit risk		260,836	58,607	198,351	17,176	14,039	549,009	15	%	85	%

(1) See the Financial Reporting Method section on pages 4 to 8 for additional information on capital management measures.

(2) Excludes equity securities and certain other assets such as investments in deconsolidated subsidiaries and joint ventures, right-of-use properties and assets, goodwill, deferred tax assets, and intangible assets.

(3) Securities purchased under reverse repurchase agreements and sold under repurchase agreements as well as securities loaned and borrowed.

(4) Letters of guarantee, documentary letters of credit, and securitized assets that represent the Bank's commitment to make payments in the event that an obligor cannot meet its financial obligations to third parties.

(5) Includes exposures to qualifying central counterparties (QCCP).

To meet OSFI's mortgage loan disclosure requirements, additional information has been provided in Supplementary Financial Information - First Quarter 2024 and in Supplementary Regulatory Capital and Pillar 3 Disclosure - First Quarter 2024, which are available on the Bank's website at nbc.ca.

Market Risk

Market risk is the risk of losses arising from movements in market prices. The Bank is exposed to market risk through its participation in trading, investment, and asset/liability management activities. In recent years, the Bank has been operating in a volatile environment. The geopolitical landscape (notably the Russia-Ukraine war and the clashes between Hamas and Israel), inflation, climate change, and higher interest rates continue to create uncertainty.

The following tables provide a breakdown of the Bank's Consolidated Balance Sheet into financial assets and liabilities by those that carry market risk and those that do not carry market risk, distinguishing between trading positions whose main risk measures are Value-at-Risk (VaR) and non-trading positions that use other risk measures.

Reconciliation of Market Risk With Consolidated Balance Sheet Items

(millions of Canadian dollars)			As at January 31, 2024
				Market risk measures
			Balance sheet	Trading⁽¹⁾	Non-trading⁽²⁾	Not subject to market risk	Non-traded risk primary risk sensitivity
Assets
	Cash and deposits with financial institutions		37,399	1,484	22,963	12,952	Interest rate⁽³⁾
	Securities
		At fair value through profit or loss	105,454	102,082	3,372	−	Interest rate⁽³⁾ and equity
		At fair value through other comprehensive income	12,309	−	12,309	−	Interest rate⁽³⁾ and equity⁽⁴⁾
		At amortized cost	12,302	−	12,302	−	Interest rate⁽³⁾
	Securities purchased under reverse repurchase
		agreements and securities borrowed	12,926	−	12,926	−	Interest rate⁽³⁾⁽⁵⁾
	Loans and acceptances, net of allowances		230,157	13,837	216,320	−	Interest rate⁽³⁾
	Derivative financial instruments		10,627	10,444	183	−	Interest rate and exchange rate
	Defined benefit asset		394	−	394	−	Other
	Other		12,359	514	−	11,845
			433,927	128,361	280,769	24,797
Liabilities
	Deposits		300,097	21,455	278,642	−	Interest rate⁽³⁾
	Acceptances		5,633	−	5,633	−	Interest rate⁽³⁾
	Obligations related to securities sold short		16,140	16,140	−	−
	Obligations related to securities sold under repurchase
		agreements and securities loaned	37,313	−	37,313	−	Interest rate⁽³⁾⁽⁵⁾
	Derivative financial instruments		17,030	16,466	564	−	Interest rate and exchange rate
	Liabilities related to transferred receivables		25,682	9,321	16,361	−	Interest rate⁽³⁾
	Defined benefit liability		101	−	101	−	Other
	Other		7,281	−	49	7,232	Interest rate⁽³⁾
	Subordinated debt		749	−	749	−	Interest rate⁽³⁾
			410,026	63,382	339,412	7,232

(1) Trading positions whose risk measure is total VaR. For additional information, see the table in the pages ahead and in the Market Risk section of the 2023 Annual Report that shows the VaR distribution of the trading portfolios by risk category and their diversification effect.

(2) Non-trading positions that use other risk measures.

(3) For additional information, see the table in the pages ahead and in the Market Risk section of the 2023 Annual Report that shows the VaR distribution of the trading portfolios by risk category and their diversification effect and the interest rate sensitivity table.

(4) The fair value of equity securities designated at fair value through other comprehensive income is presented in Notes 3 and 5 to the consolidated financial statements.

(5) These instruments are recorded at amortized cost and are subject to credit risk for capital management purposes. For trading-related transactions with maturities of more than one day, interest rate risk is included in the VaR measures.

(millions of Canadian dollars)			As at October 31, 2023⁽¹⁾
				Market risk measures
			Balance sheet	Trading⁽²⁾	Non-trading⁽³⁾	Not subject to market risk	Non-traded risk primary risk sensitivity
Assets
	Cash and deposits with financial institutions		35,234	685	24,950	9,599	Interest rate⁽⁴⁾
	Securities
		At fair value through profit or loss	99,994	98,559	1,435	−	Interest rate⁽⁴⁾ and equity⁽⁵⁾
		At fair value through other comprehensive income	9,242	−	9,242	−	Interest rate⁽⁴⁾ and equity⁽⁶⁾
		Amortized cost	12,582	−	12,582	−	Interest rate⁽⁴⁾
	Securities purchased under reverse repurchase
		agreements and securities borrowed	11,260	−	11,260	−	Interest rate⁽⁴⁾⁽⁷⁾
	Loans and acceptances, net of allowances		225,443	12,739	212,704	−	Interest rate⁽⁴⁾
	Derivative financial instruments		17,516	16,349	1,167	−	Interest rate⁽⁸⁾ and exchange rate⁽⁸⁾
	Defined benefit asset		356	−	356	−	Other⁽⁹⁾
	Other		11,850	544	−	11,306
			423,477	128,876	273,696	20,905
Liabilities
	Deposits		288,173	18,126	270,047	−	Interest rate⁽⁴⁾
	Acceptances		6,627	−	6,627	−	Interest rate⁽⁴⁾
	Obligations related to securities sold short		13,660	13,660	−	−
	Obligations related to securities sold under repurchase
		agreements and securities loaned	38,347	−	38,347	−	Interest rate⁽⁴⁾⁽⁷⁾
	Derivative financial instruments		19,888	19,145	743	−	Interest rate⁽⁸⁾ and exchange rate⁽⁸⁾
	Liabilities related to transferred receivables		25,034	9,507	15,527	−	Interest rate⁽⁴⁾
	Defined benefit liability		94	−	94	−	Other⁽⁹⁾
	Other		7,322	−	49	7,273	Interest rate⁽⁴⁾
	Subordinated debt		748	−	748	−	Interest rate⁽⁴⁾
			399,893	60,438	332,182	7,273

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

(2) Trading positions whose risk measures are VaR as well as total SVaR. For additional information, see the table on the following page and in the Market Risk section of the 2023 Annual Report that shows the VaR distribution of the trading portfolios by risk category and their diversification effect.

(3) Non-trading positions that use other risk measures.

(4) For additional information, see the table in the pages ahead and in the Market Risk section of the 2023 Annual Report that shows the VaR distribution of the trading portfolios by risk category and their diversification effect and the interest rate sensitivity table.

(5) For additional information, see Note 6 to the audited annual consolidated financial statements for the year ended October 31, 2023.

(6) The fair value of equity securities designated at fair value through other comprehensive income is presented in Notes 3 and 5 to the consolidated financial statements.

(7) These instruments are recorded at amortized cost and are subject to credit risk for capital management purposes. For trading-related transactions with maturities of more than one day, interest rate risk is included in the VaR and SVaR measures.

(8) For additional information, see Notes 16 and 17 to the audited annual consolidated financial statements for the year ended October 31, 2023.

(9) For additional information, see Note 23 to the audited annual consolidated financial statements for the year ended October 31, 2023.

Trading Activities

The table below shows the VaR distribution of trading portfolios by risk category and their diversification effect.

VaR of Trading Portfolios⁽¹⁾⁽²⁾

(millions of Canadian dollars)					Quarter ended
	January 31, 2024				October 31, 2023		January 31, 2023
	Low	High	Average	Period end	Average	Period end	Average	Period end
Interest rate	(6.5)	(9.9)	(8.0)	(8.5)	(8.8)	(8.7)	(6.7)	(6.3)
Exchange rate	(0.8)	(5.3)	(2.5)	(1.0)	(3.5)	(5.0)	(2.3)	(2.0)
Equity	(4.8)	(8.6)	(6.2)	(6.1)	(7.6)	(6.5)	(7.1)	(5.8)
Commodity	(1.3)	(2.4)	(1.8)	(1.7)	(1.4)	(1.6)	(1.0)	(0.9)
Diversification effect⁽³⁾	n.m.	n.m.	8.3	7.2	10.8	10.4	8.5	7.4
Total trading VaR	(8.4)	(12.2)	(10.2)	(10.1)	(10.5)	(11.4)	(8.6)	(7.6)

n.m. Computation of a diversification effect for the high and low is not meaningful, as highs and lows may occur on different days and be attributable to different types of risk.

(1) See the Glossary section on pages 43 to 46 for details on the composition of these measures.

(2) Amounts are presented on a pre-tax basis and represent one-day VaR using a 99% confidence level.

(3) The total trading VaR is less than the sum of the individual risk factor VaR results due to the diversification effect.

The average total trading VaR remained relatively stable between the fourth quarter of 2023 and the first quarter of 2024.

Daily Trading and Underwriting Revenues

The following chart shows daily trading and underwriting revenues and VaR. During the quarter ended January 31, 2024, daily trading and underwriting revenues were positive 95% of the days. In addition, two trading days were marked by daily trading and underwriting net losses of more than $1 million. None of these losses exceeded the VaR.

Quarter Ended January 31, 2024

(millions of Canadian dollars)

Interest Rate Sensitivity - Non-Trading Activities (Before Tax)

The following table presents the potential before-tax impact of an immediate and sustained 100-basis-point increase or of an immediate and sustained 100‑basis-point decrease in interest rates on the economic value of equity and on the net interest income of the Bank's non-trading portfolios for the next 12 months, assuming no further hedging is undertaken.

(millions of Canadian dollars)	As at January 31, 2024				As at October 31, 2023
	Canadian dollar	Other currencies	Total	Canadian dollar	Other currencies	Total
Impact on equity
100-basis-point increase in the interest rate	(335)	27	(308)	(297)	2	(295)
100-basis-point decrease in the interest rate	336	(29)	307	272	7	279
Impact on net interest income
100-basis-point increase in the interest rate	78	(6)	72	73	1	74
100-basis-point decrease in the interest rate	(102)	1	(101)	(103)	1	(102)

Liquidity and Funding Risk

Liquidity and funding risk is the risk that the Bank will be unable to honour daily cash and financial obligations without resorting to costly and untimely measures. Liquidity and funding risk arises when sources of funds become insufficient to meet scheduled payments under the Bank's commitments.

Liquidity risk stems from mismatched cash flows related to assets and liabilities as well as the characteristics of certain products such as credit commitments and non-fixed-term deposits.

Funding risk is defined as the risk to the Bank's ongoing ability to raise sufficient funds to finance actual or proposed business activities on an unsecured or secured basis at an acceptable price. The funding management priority is to achieve an optimal balance between deposits, securitization, secured funding, and unsecured funding. This brings optimal stability to the funding and reduces vulnerability to unpredictable events.

Regulatory Developments

The Bank continues to closely monitor regulatory developments and participates actively in various consultative processes. For additional information about the regulatory context as at October 31, 2023, refer to page 91 of the Risk Management section in the 2023 Annual Report. Since November 1, 2023, there has been a regulatory development to be considered.

On October 31, 2023, OSFI announced its decision on reviewing the Liquidity Adequacy Requirements (LAR) Guideline with respect to wholesale funding sources with retail-like characteristics, specifically high-interest savings account exchange-traded funds (HISA ETFs). OSFI determined these sources to be unsecure wholesale funding provided by other legal entities. Despite some retail-like characteristics and term agreements with depositors, the fact that these products are held directly by fund managers led OSFI to conclude that a 100% run-off factor for these products was appropriate. As a result, deposit-taking institutions exposed to such funding must hold sufficient high-quality liquid assets to support all HISA ETF balances that can be withdrawn within 30 days. Since January 31, 2024, all deposit-taking institutions were required to transition the measurement and related reporting to the run-off treatment specified in the LAR guideline. Moreover, changes for reporting LCR were calculated retrospectively to the start of the quarter to account for daily fluctuations in the ratio (November 1, 2023 for the Bank).

Liquidity Management

Liquid Assets

To protect depositors and creditors from unexpected crisis situations, the Bank holds a portfolio of unencumbered liquid assets that can be readily liquidated to meet financial obligations. The majority of the unencumbered liquid assets are held in Canadian or U.S. dollars. Moreover, all assets that can be quickly monetized are considered liquid assets. The Bank's liquidity reserves do not factor in the availability of the emergency liquidity facilities of central banks. The following tables provide information on the Bank's encumbered and unencumbered assets.

Liquid Asset Portfolio⁽¹⁾

(millions of Canadian dollars)						As at January 31, 2024		As at October 31, 2023
			Bank-owned liquid assets⁽²⁾	Liquid assets received⁽³⁾	Total liquid assets	Encumbered liquid assets⁽⁴⁾	Unencumbered liquid assets	Unencumbered liquid assets
Cash and deposits with financial institutions			37,399	−	37,399	9,540	27,859	25,944
Securities
	Issued or guaranteed by the Canadian government, U.S.
		Treasury, other U.S. agencies and other foreign governments	35,137	41,301	76,438	44,122	32,316	29,062
	Issued or guaranteed by Canadian provincial and
		municipal governments	13,026	6,700	19,726	13,143	6,583	6,403
	Other debt securities		8,620	4,148	12,768	3,115	9,653	10,095
	Equity securities		73,282	47,198	120,480	91,092	29,388	27,253
Loans
	Securities backed by insured residential mortgages		13,190	−	13,190	6,966	6,224	6,140
As at January 31, 2024			180,654	99,347	280,001	167,978	112,023
As at October 31, 2023			169,888	87,919	257,807	152,910		104,897

(millions of Canadian dollars)		As at January 31, 2024	As at October 31, 2023
Unencumbered liquid assets by entity
	National Bank (parent)	62,453	55,626
	Domestic subsidiaries	9,427	10,013
	Foreign subsidiaries and branches	40,143	39,258
		112,023	104,897

(millions of Canadian dollars)		As at January 31, 2024	As at October 31, 2023
Unencumbered liquid assets by currency
	Canadian dollar	54,284	51,882
	U.S. dollar	43,071	35,243
	Other currencies	14,668	17,772
		112,023	104,897

Liquid Asset Portfolio⁽¹⁾ - Average⁽⁵⁾

(millions of Canadian dollars)						Quarter ended
						January 31, 2024		October 31, 2023
			Bank-owned liquid assets⁽²⁾	Liquid assets received⁽³⁾	Total liquid assets	Encumbered liquid assets⁽⁴⁾	Unencumbered liquid assets	Unencumbered liquid assets
Cash and deposits with financial institutions			36,130	−	36,130	9,421	26,709	27,651
Securities
	Issued or guaranteed by the Canadian government, U.S.
		Treasury, other U.S. agencies and other foreign governments	36,401	46,383	82,784	48,520	34,264	23,902
	Issued or guaranteed by Canadian provincial and
		municipal governments	13,978	6,775	20,753	14,801	5,952	8,214
	Other debt securities		9,380	4,170	13,550	3,225	10,325	10,350
	Equity securities		78,254	48,226	126,480	92,580	33,900	32,820
Loans
	Securities backed by insured residential mortgages		12,648	−	12,648	6,837	5,811	5,342
			186,791	105,554	292,345	175,384	116,961	108,279

(1) See the Financial Reporting Method section on pages 4 to 8 for additional information on capital management measures.

(2) Bank-owned liquid assets include assets for which there are no legal or geographic restrictions.

(3) Securities received as collateral with respect to securities financing and derivative transactions and securities purchased under reverse repurchase agreements and securities borrowed.

(4) In the normal course of its funding activities, the Bank pledges assets as collateral in accordance with standard terms. Encumbered liquid assets include assets used to cover short sales, obligations related to securities sold under repurchase agreements and securities loaned, guarantees related to security-backed loans and borrowings, collateral related to derivative financial instrument transactions, asset-backed securities, and liquid assets legally restricted from transfers.

(5) The average is based on the sum of the end-of-period balances of the three months of the quarter divided by three.

Summary of Encumbered and Unencumbered Assets⁽¹⁾

(millions of Canadian dollars)						As at January 31, 2024
		Encumbered assets⁽²⁾		Unencumbered assets		Total	Encumbered assets as a % of total assets
		Pledged as collateral	Other⁽³⁾	Available as collateral	Other⁽⁴⁾
Cash and deposits with financial institutions		447	9,093	27,859	−	37,399	2.2
Securities		52,125	−	77,940	−	130,065	12.0
Securities purchased under reverse repurchase
	agreements and securities borrowed	−	12,926	−	−	12,926	3.0
Loans and acceptances, net of allowances		35,952	−	6,224	187,981	230,157	8.3
Derivative financial instruments		−	−	−	10,627	10,627	−
Investments in associates and joint ventures		−	−	−	35	35	−
Premises and equipment		−	−	−	1,787	1,787	−
Goodwill		−	−	−	1,516	1,516	−
Intangible assets		−	−	−	1,237	1,237	−
Other assets		−	−	−	8,178	8,178	−
		88,524	22,019	112,023	211,361	433,927	25.5


(millions of Canadian dollars)						As at October 31, 2023⁽⁵⁾
		Encumbered assets⁽²⁾		Unencumbered assets		Total	Encumbered assets as a % of total assets
		Pledged as collateral	Other⁽³⁾	Available as collateral	Other⁽⁴⁾
Cash and deposits with financial institutions		449	8,841	25,944	−	35,234	2.2
Securities		49,005	−	72,813	−	121,818	11.6
Securities purchased under reverse repurchase
	agreements and securities borrowed	−	11,260	−	−	11,260	2.6
Loans and acceptances, net of allowances		36,705	−	6,140	182,598	225,443	8.7
Derivative financial instruments		−	−	−	17,516	17,516	−
Investments in associates and joint ventures		−	−	−	49	49	−
Premises and equipment		−	−	−	1,592	1,592	−
Goodwill		−	−	−	1,521	1,521	−
Intangible assets		−	−	−	1,256	1,256	−
Other assets		−	−	−	7,788	7,788	−
		86,159	20,101	104,897	212,320	423,477	25.1

(1) See the Financial Reporting Method section on pages 4 to 8 for additional information on capital management measures.

(2) In the normal course of its funding activities, the Bank pledges assets as collateral in accordance with standard terms. Encumbered assets include assets used to cover short sales, obligations related to securities sold under repurchase agreements and securities loaned, guarantees related to security-backed loans and borrowings, collateral related to derivative financial instrument transactions, asset-backed securities, residential mortgage loans securitized and transferred under the Canada Mortgage Bond program, assets held in consolidated trusts supporting the Bank's funding activities, and mortgage loans transferred under the covered bond program.

(3) Other encumbered assets include assets for which there are restrictions and that cannot therefore be used for collateral or funding purposes as well as assets used to cover short sales.

(4) Other unencumbered assets are assets that cannot be used for collateral or funding purposes in their current form. This category includes assets that are potentially eligible as funding program collateral (e.g., mortgages insured by the Canada Mortgage and Housing Corporation that can be securitized into mortgage-backed securities under the National Housing Act (Canada)).

(5) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

Liquidity Coverage Ratio

The liquidity coverage ratio (LCR) was introduced primarily to ensure that banks could withstand periods of severe short-term stress. LCR is calculated by dividing the total amount of high-quality liquid assets (HQLA) by the total amount of net cash outflows. OSFI requires Canadian banks to maintain a minimum LCR of 100%. An LCR above 100% ensures that banks are holding sufficient high-quality liquid assets to cover net cash outflows given a severe, 30‑day liquidity crisis. The assumptions underlying the LCR scenario are established by the BCBS and OSFI's Liquidity Adequacy Requirements Guideline.

The table on the following page provides average LCR data calculated using the daily figures in the quarter. For the quarter ended January 31, 2024, the Bank's average LCR was 145%, well above the 100% regulatory requirement and demonstrating the Bank's solid short-term liquidity position.

LCR Disclosure Requirements⁽¹⁾⁽²⁾

(millions of Canadian dollars)					Quarter ended
			January 31, 2024			October 31, 2023
			Total unweighted value⁽³⁾ (average)	Total weighted value⁽⁴⁾ (average)		Total weighted value⁽⁴⁾ (average)
High-quality liquid assets (HQLA)
	Total HQLA		n.a.	78,283		74,177
Cash outflows
	Retail deposits and deposits from small business customers, of which:		61,779	5,601		10,934
		Stable deposits	27,369	821		831
		Less stable deposits	34,410	4,780		10,103
	Unsecured wholesale funding, of which:		112,580	67,007		51,528
		Operational deposits (all counterparties) and deposits in networks of cooperative banks	30,989	7,531		7,417
		Non-operational deposits (all counterparties)	71,159	48,893		34,752
		Unsecured debt	10,432	10,583		9,359
	Secured wholesale funding		n.a.	19,105		24,716
	Additional requirements, of which:		67,442	17,109		16,774
		Outflows related to derivative exposures and other collateral requirements	22,280	9,182		8,912
		Outflows related to loss of funding on secured debt securities	1,965	1,935		1,949
		Backstop liquidity and credit enhancement facilities and commitments to extend credit	43,197	5,992		5,913
	Other contractual commitments to extend credit		1,945	842		760
	Other contingent commitments to extend credit		140,579	1,995		1,968
	Total cash outflows		n.a.	111,659		106,680
Cash inflows
	Secured lending (e.g., reverse repos)		121,709	26,991		27,660
	Inflows from fully performing exposures		10,985	7,322		6,669
	Other cash inflows		21,915	21,777		23,574
	Total cash inflows		154,609	56,090		57,903

				Total adjusted value⁽⁵⁾		Total adjusted value⁽⁵⁾
Total HQLA				78,283		74,177
Total net cash outflows				55,569		48,777
Liquidity coverage ratio (%)⁽⁶⁾				145	%	155	%

n.a. Not applicable

(1) See the Financial Reporting Method section on pages 4 to 8 for additional information on capital management measures.

(2) OSFI prescribed a table format in order to standardize disclosure throughout the banking industry.

(3) Unweighted values are calculated as outstanding balances maturing or callable within 30 days (for inflows and outflows).

(4) Weighted values are calculated after the application of respective haircuts (for HQLA) or inflow and outflow rates.

(5) Total adjusted values are calculated after the application of both haircuts and inflow and outflow rates and any applicable caps.

(6) The data in this table is calculated using averages of the daily figures in the quarter.

As at January 31, 2024, Level 1 liquid assets represented 85% of the Bank's HQLA, which includes cash, central bank deposits, and bonds issued or guaranteed by the Canadian government and Canadian provincial governments.

Cash outflows arise from the application of OSFI-prescribed assumptions on deposits, debt, secured funding, commitments and additional collateral requirements. The cash outflows are partly offset by cash inflows, which come mainly from secured loans and performing loans. The Bank expects some quarter-over-quarter variation between reported LCRs without such variation being necessarily indicative of a trend. The variation between the quarter ended January 31, 2024 and the preceding quarter was a result of normal business operations. The Bank's liquid asset buffer is well in excess of its total net cash outflows.

The LCR assumptions differ from the assumptions used for the liquidity disclosures presented in the tables on the previous pages or those used for internal liquidity management rules. While the liquidity disclosure framework is prescribed by the EDTF, the Bank's internal liquidity metrics use assumptions that are calibrated according to its business model and experience.

Net Stable Funding Ratio

The BCBS has developed the net stable funding ratio (NSFR) to promote a more resilient banking sector. The NSFR requires institutions to maintain a stable funding profile in relation to the composition of their assets and off-balance-sheet activities. A viable funding structure is intended to reduce the likelihood that disruptions to an institution's regular sources of funding would erode its liquidity position in a way that would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR is calculated by dividing available stable funding by required stable funding. OSFI has been requiring Canadian banks to maintain a minimum NSFR of 100%.

The following table provides the available stable funding and required stable funding in accordance with OSFI's Liquidity Adequacy Requirements Guideline. As at January 31, 2024, the Bank's NSFR was 117%, well above the 100% regulatory requirement and demonstrating the Bank's solid long-term liquidity position.

NSFR Disclosure Requirements⁽¹⁾⁽²⁾

(millions of Canadian dollars)							As at January 31, 2024		As at October 31, 2023
			Unweighted value by residual maturity				Weighted value⁽³⁾
			No maturity	6 months or less	Over 6 months to 1 year	Over 1 year	Weighted value⁽³⁾		Weighted value⁽³⁾
Available Stable Funding (ASF) Items
Capital:			23,901	−	−	749	24,650		24,425
	Regulatory capital		23,901	−	−	749	24,650		24,425
	Other capital instruments		−	−	−	−	−		−
Retail deposits and deposits from small business customers:			54,009	15,792	8,391	26,954	97,730		103,077
	Stable deposits		25,233	5,031	4,349	8,510	41,392		40,575
	Less stable deposits		28,776	10,761	4,042	18,444	56,338		62,502
Wholesale funding:			75,015	92,999	13,088	51,430	107,897		99,442
	Operational deposits		31,346	−	−	−	15,673		15,721
	Other wholesale funding		43,669	92,999	13,088	51,430	92,224		83,721
Liabilities with matching interdependent assets⁽⁴⁾			−	3,479	1,953	20,250	−		−
Other liabilities⁽⁵⁾:			19,994		11,601		639		674
	NSFR derivative liabilities⁽⁵⁾		n.a.		2,239		n.a.		n.a.
	All other liabilities and equity not included in the above categories		19,994	2,780	120	6,462	639		674
Total ASF			n.a.	n.a.	n.a.	n.a.	230,916		227,618
Required Stable Funding (RSF) Items
Total NSFR high-quality liquid assets (HQLA)			n.a.	n.a.	n.a.	n.a.	6,647		9,004
Deposits held at other financial institutions for operational purposes			−	−	−	−	−		−
Performing loans and securities:			63,067	79,150	25,691	101,828	161,551		159,117
	Performing loans to financial institutions secured by Level 1 HQLA		77	1,252	1	−	67		18
	Performing loans to financial institutions secured by non-Level-1 HQLA and unsecured performing loans to financial institutions		7,114	45,272	2,143	1,028	8,036		6,408
	Performing loans to non-financial corporate clients, loans to retail and small business customers, and loans to sovereigns, central banks and PSEs, of which:		31,363	24,762	15,544	38,872	81,573		79,695
		With a risk weight of less than or equal to 35% under the Basel II Standardized Approach for credit risk	228	2,091	784	1,640	2,652		1,556
	Performing residential mortgages, of which:		8,980	5,837	6,869	58,630	53,950		54,184
		With a risk weight of less than or equal to 35% under the Basel II Standardized Approach for credit risk	8,980	5,837	6,869	58,630	53,950		54,184
	Securities that are not in default and do not qualify as HQLA, including exchange-traded equities		15,533	2,027	1,134	3,298	17,925		18,812
Assets with matching interdependent liabilities⁽⁴⁾			−	3,479	1,953	20,250	−		−
Other assets⁽⁵⁾:			6,465		32,585		24,114		20,922
	Physical traded commodities, including gold		447	n.a.	n.a.	n.a.	447		449
	Assets posted as initial margin for derivative contracts and contributions to default funds of CCPs⁽⁵⁾		n.a.		12,555		10,672		7,732
	NSFR derivative assets⁽⁵⁾		n.a.		2,823		585		−
	NSFR derivative liabilities before deduction of the variation margin posted⁽⁵⁾		n.a.		10,267		513		733
	All other assets not included in the above categories		6,018	4,663	536	1,741	11,897		12,008
Off-balance-sheet items⁽⁵⁾			n.a.		116,502		4,389		4,259
Total RSF			n.a.	n.a.	n.a.	n.a.	196,701		193,302
Net Stable Funding Ratio (%)			n.a.	n.a.	n.a.	n.a.	117	%	118	%

n.a. Not applicable

(1) See the Financial Reporting Method section on pages 4 to 8 for additional information on capital management measures.

(2) OSFI prescribed a table format in order to standardize disclosure throughout the banking industry.

(3) Weighted values are calculated after application of the weightings set out in OSFI's Liquidity Adequacy Requirements Guideline.

(4) As per OSFI's specifications, liabilities arising from transactions involving the Canada Mortgage Bond program and their corresponding encumbered mortgages are given ASF and RSF weights of 0%, respectively.

(5) As per OSFI's specifications, there is no need to differentiate by maturities.

The NSFR represents the amount of ASF relative to the amount of RSF. ASF is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of RSF of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance-sheet exposures. The amounts of ASF and RSF are calibrated to reflect the degree of stability of liabilities and liquidity of assets. The Bank expects some quarter-over-quarter variation between reported NSFRs without such variation being necessarily indicative of a long-term trend.

The NSFR assumptions differ from the assumptions used for the liquidity disclosures provided in the tables on the preceding pages or those used for internal liquidity management rules. While the liquidity disclosure framework is prescribed by the EDTF, the Bank's internal liquidity metrics use assumptions that are calibrated according to its business model and experience.

Funding

The Bank continuously monitors and analyzes market trends as well as possibilities for accessing less expensive and more flexible funding, considering both the risks and opportunities observed. The deposit strategy remains a priority for the Bank, which continues to prefer deposits to institutional funding.

The table below presents the residual contractual maturities of the Bank's wholesale funding. The information has been presented in accordance with the categories recommended by the EDTF working group for comparison purposes with other banks.

Residual Contractual Maturities of Wholesale Funding⁽¹⁾

(millions of Canadian dollars)								As at January 31, 2024
		1 month or less	Over 1 month to 3 months	Over 3 months to 6 months	Over 6 months to 12 months	Subtotal 1 year or less	Over 1 year to 2 years	Over 2 years	Total
Deposits from banks⁽²⁾		373	−	−	−	373	−	984	1,357
Certificates of deposit and commercial paper⁽³⁾		4,546	7,570	6,916	5,779	24,811	−	−	24,811
Senior unsecured medium-term notes⁽⁴⁾⁽⁵⁾		1,747	1,186	1,559	4,284	8,776	5,077	8,029	21,882
Senior unsecured structured notes		−	−	−	33	33	124	2,997	3,154
Covered bonds and asset-backed securities
	Mortgage securitization	−	830	2,276	1,974	5,080	4,314	16,288	25,682
	Covered bonds	−	−	−	343	343	1,442	7,976	9,761
	Securitization of credit card receivables	−	−	−	49	49	−	−	49
Subordinated liabilities⁽⁶⁾		−	−	−	−	−	−	749	749
		6,666	9,586	10,751	12,462	39,465	10,957	37,023	87,445
Secured funding		−	830	2,276	2,366	5,472	5,756	24,264	35,492
Unsecured funding		6,666	8,756	8,475	10,096	33,993	5,201	12,759	51,953
		6,666	9,586	10,751	12,462	39,465	10,957	37,023	87,445
As at October 31, 2023		3,337	6,616	15,200	6,868	32,021	12,347	34,370	78,738

(1) Bankers' acceptances are not included in this table.

(2) Deposits from banks include all non-negotiable term deposits from banks.

(3) Includes bearer deposit notes.

(4) Certificates of deposit denominated in euros are included in senior unsecured medium-term notes.

(5) Includes debts subject to bank recapitalization (bail-in) conversion regulations.

(6) Subordinated debt is presented in this table, but the Bank does not consider it as part of its wholesale funding.

As part of a comprehensive liquidity management framework, the Bank regularly reviews its contracts that stipulate that additional collateral could be required in the event of a downgrade of the Bank's credit rating. The Bank's liquidity position management approach already incorporates additional collateral requirements in the event of a one-notch to three-notch downgrade in credit rating. The table below presents the additional collateral requirements in the event of a one-, two-, or three-notch credit rating downgrade.

(millions of Canadian dollars)		As at January 31, 2024
	One-notch downgrade	Two-notch downgrade	Three-notch downgrade

Derivatives⁽¹⁾	30	78	81

(1) Contractual requirements related to agreements known as initial margins and variation margins.

Residual Contractual Maturities of Balance Sheet Items and Off-Balance-Sheet Commitments

The following tables present balance sheet items and off-balance-sheet commitments by residual contractual maturity as at January 31, 2024 with comparative figures as at October 31, 2023. The information gathered from this maturity analysis is a component of liquidity and funding management. However, this maturity profile does not represent how the Bank manages its interest rate risk or its liquidity risk and funding needs. The Bank considers factors other than contractual maturity when assessing liquid assets or determining expected future cash flows.

In the normal course of business, the Bank enters into various off-balance-sheet commitments. The credit instruments used to meet the financing needs of its clients represent the maximum amount of additional credit the Bank could be obligated to extend if the commitments were fully drawn.

The Bank also has future minimum commitments under leases for premises as well as under other contracts, mainly commitments to purchase loans and contracts for outsourced information technology services. Most of the lease commitments are related to operating leases.

(millions of Canadian dollars)										As at January 31, 2024
			1 month or less	Over 1 month to 3 months	Over 3 months to 6 months	Over 6 months to 9 months	Over 9 months to 12 months	Over 1 year to 2 years	Over 2 years to 5 years	Over 5 years	No specified maturity	Total
Assets
Cash and deposits
	with financial institutions		27,756	626	362	230	370	−	−	−	8,055	37,399
Securities
	At fair value through
		profit or loss	431	459	522	1,442	569	4,190	12,698	12,557	72,586	105,454
	At fair value through
		other comprehensive income	130	152	218	418	165	734	6,063	3,733	696	12,309
	At amortized cost		8	422	416	1,274	922	3,053	4,876	1,331	−	12,302
			569	1,033	1,156	3,134	1,656	7,977	23,637	17,621	73,282	130,065
Securities purchased under
	reverse repurchase
	agreements and
	securities borrowed		4,100	582	1,500	69	403	672	−	−	5,600	12,926
Loans⁽¹⁾
	Residential mortgage		1,226	1,363	3,144	2,939	3,088	17,319	49,788	9,126	531	88,524
	Personal		505	727	1,304	1,395	1,355	6,847	14,725	6,013	13,436	46,307
	Credit card										2,541	2,541
	Business and government		21,448	3,894	3,940	3,648	3,744	6,673	12,632	5,521	26,863	88,363
	Customers' liability under
		acceptances	4,833	787	13	−	−	−	−	−	−	5,633
	Allowances for credit losses										(1,211)	(1,211)
			28,012	6,771	8,401	7,982	8,187	30,839	77,145	20,660	42,160	230,157
Other
	Derivative financial instruments		1,957	1,116	1,013	455	687	1,926	1,442	2,031	−	10,627
	Investments in associates and
		joint ventures									35	35
	Premises and equipment										1,787	1,787
	Goodwill										1,516	1,516
	Intangible assets										1,237	1,237
	Other assets⁽¹⁾		3,209	154	1,301	268	237	733	265	567	1,444	8,178
			5,166	1,270	2,314	723	924	2,659	1,707	2,598	6,019	23,380
			65,603	10,282	13,733	12,138	11,540	42,147	102,489	40,879	135,116	433,927

(1) Amounts collectible on demand are considered to have no specified maturity.

(millions of Canadian dollars)										As at January 31, 2024
			1 month or less	Over 1 month to 3 months	Over 3 months to 6 months	Over 6 months to 9 months	Over 9 months to 12 months	Over 1 year to 2 years	Over 2 years to 5 years	Over 5 years	No specified maturity	Total
Liabilities and equity
Deposits⁽¹⁾⁽²⁾
	Personal		3,218	3,219	6,049	5,960	4,598	8,653	13,725	5,063	40,579	91,064
	Business and government		35,251	16,078	12,982	5,602	7,853	7,964	16,898	6,433	95,363	204,424
	Deposit-taking institutions		874	822	118	18	16	2	14	31	2,714	4,609
			39,343	20,119	19,149	11,580	12,467	16,619	30,637	11,527	138,656	300,097
Other
	Acceptances		4,833	787	13	−	−	−	−	−	−	5,633
	Obligations related
		to securities sold short⁽³⁾	18	513	262	208	55	947	2,734	4,229	7,174	16,140
	Obligations related to
		securities sold under
		repurchase agreements and
		securities loaned	21,427	3,195	1,008	−	−	3,737	−	−	7,946	37,313
	Derivative financial
		instruments	2,461	1,409	1,122	511	1,227	1,889	4,776	3,635	−	17,030
	Liabilities related to transferred
		receivables⁽⁴⁾	−	830	2,276	592	1,382	4,314	8,372	7,916	−	25,682
	Securitization - Credit card⁽⁵⁾		−	−	−	−	49	−	−	−	−	49
	Lease liabilities⁽⁵⁾		7	14	21	19	19	71	182	150	−	483
	Other liabilities - Other items⁽¹⁾⁽⁵⁾		1,508	238	119	58	24	31	74	71	4,727	6,850
			30,254	6,986	4,821	1,388	2,756	10,989	16,138	16,001	19,847	109,180
Subordinated debt			−	−	−	−	−	−	−	749	−	749
Equity											23,901	23,901
			69,597	27,105	23,970	12,968	15,223	27,608	46,775	28,277	182,404	433,927
Off-balance-sheet commitments
	Letters of guarantee and
		documentary letters of credit	139	843	1,867	2,265	2,902	533	205	2	−	8,756
	Credit card receivables⁽⁶⁾										10,045	10,045
	Backstop liquidity and credit
		enhancement facilities⁽⁷⁾	−	−	15	−	15	5,552	−	−	4,631	10,213
	Commitments to extend credit⁽⁸⁾		2,688	12,500	10,799	6,076	4,862	4,358	3,420	102	49,378	94,183
	Obligations related to:
		Lease commitments⁽⁹⁾	1	1	1	2	2	6	7	1	−	21
		Other contracts⁽¹⁰⁾	7	14	21	21	21	48	265	12	155	564

(1) Amounts payable upon demand or notice are considered to have no specified maturity.

(2) The Deposits item is presented in greater detail than it is on the Consolidated Balance Sheet.

(3) Amounts are disclosed according to the remaining contractual maturity of the underlying security.

(4) These amounts mainly include liabilities related to the securitization of mortgage loans.

(5) The Other liabilities item is presented in greater detail than it is on the Consolidated Balance Sheet.

(6) These amounts are unconditionally revocable at the Bank's discretion at any time.

(7) In the event of payment on one of the backstop liquidity facilities, the Bank will receive as collateral government bonds in an amount up to $5.6 billion.

(8) These amounts include $48.2 billion that is unconditionally revocable at the Bank's discretion at any time.

(9) These amounts include leases for which the underlying asset is of low value and leases other than for real estate of less than one year.

(10) These amounts include $38 million in contractual commitments related to the portion of the head office building under construction.

(millions of Canadian dollars)										As at October 31, 2023⁽¹⁾
			1 month or less	Over 1 month to 3 months	Over 3 months to 6 months	Over 6 months to 9 months	Over 9 months to 12 months	Over 1 year to 2 years	Over 2 years to 5 years	Over 5 years	No specified maturity	Total
Assets
Cash and deposits
	with financial institutions		25,374	448	354	50	216	−	−	−	8,792	35,234
Securities
	At fair value through
		profit or loss	694	258	1,663	1,758	2,260	3,667	10,823	12,813	66,058	99,994
	At fair value through
		other comprehensive income	3	30	154	224	426	538	4,548	2,660	659	9,242
	At amortized cost		4	158	508	338	1,399	4,110	4,713	1,352	−	12,582
			701	446	2,325	2,320	4,085	8,315	20,084	16,825	66,717	121,818
Securities purchased under
	reverse repurchase
	agreements and
	securities borrowed		2,275	1,641	716	72	416	693	−	−	5,447	11,260
Loans⁽²⁾
	Residential mortgage		1,409	1,250	1,990	3,126	2,990	15,339	51,112	9,089	542	86,847
	Personal		613	637	1,060	1,271	1,396	6,258	15,656	5,713	13,754	46,358
	Credit card										2,603	2,603
	Business and government		21,406	4,262	4,007	3,204	2,783	6,695	11,322	5,414	25,099	84,192
	Customers' liability under
		acceptances	6,191	373	50	13	−	−	−	−	−	6,627
	Allowances for credit losses										(1,184)	(1,184)
			29,619	6,522	7,107	7,614	7,169	28,292	78,090	20,216	40,814	225,443
Other
	Derivative financial instruments		2,040	1,982	1,367	1,197	611	1,696	2,399	6,224	−	17,516
	Investments in associates and
		joint ventures									49	49
	Premises and equipment										1,592	1,592
	Goodwill										1,521	1,521
	Intangible assets										1,256	1,256
	Other assets⁽²⁾		2,639	774	166	1,206	547	598	252	659	947	7,788
			4,679	2,756	1,533	2,403	1,158	2,294	2,651	6,883	5,365	29,722
			62,648	11,813	12,035	12,459	13,044	39,594	100,825	43,924	127,135	423,477

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

(2) Amounts collectible on demand are considered to have no specified maturity.

(millions of Canadian dollars)										As at October 31, 2023⁽¹⁾
			1 month or less	Over 1 month to 3 months	Over 3 months to 6 months	Over 6 months to 9 months	Over 9 months to 12 months	Over 1 year to 2 years	Over 2 years to 5 years	Over 5 years	No specified maturity	Total
Liabilities and equity
Deposits⁽²⁾⁽³⁾
	Personal		4,648	3,722	4,491	6,056	5,145	8,398	11,635	4,164	39,624	87,883
	Business and government		32,642	10,044	17,495	4,271	3,498	9,127	15,768	5,058	99,425	197,328
	Deposit-taking institutions		646	408	32	109	18	8	15	33	1,693	2,962
			37,936	14,174	22,018	10,436	8,661	17,533	27,418	9,255	140,742	288,173
Other
	Acceptances		6,191	373	50	13	−	−	−	−	−	6,627
	Obligations related
		to securities sold short⁽⁴⁾	35	155	129	73	76	347	2,332	4,123	6,390	13,660
	Obligations related to
		securities sold under
		repurchase agreements and
		securities loaned	23,041	2,719	1,040	3,467	−	274	−	−	7,806	38,347
	Derivative financial
		instruments	1,912	2,697	1,186	1,086	467	2,415	3,068	7,057	−	19,888
	Liabilities related to transferred
		receivables⁽⁵⁾	−	1,760	829	2,142	618	3,915	8,678	7,092	−	25,034
	Securitization - Credit card⁽⁶⁾		−	−	−	−	−	48	−	−	−	48
	Lease liabilities⁽⁶⁾		9	28	25	24	23	83	197	128	−	517
	Other liabilities - Other items⁽²⁾⁽⁶⁾		1,417	306	174	7	27	37	58	105	4,720	6,851
			32,605	8,038	3,433	6,812	1,211	7,119	14,333	18,505	18,916	110,972
Subordinated debt			−	−	−	−	−	−	−	748	−	748
Equity											23,584	23,584
			70,541	22,212	25,451	17,248	9,872	24,652	41,751	28,508	183,242	423,477
Off-balance-sheet commitments
	Letters of guarantee and
		documentary letters of credit	89	1,287	1,975	2,185	1,490	1,165	255	50	−	8,496
	Credit card receivables⁽⁷⁾										9,802	9,802
	Backstop liquidity and credit
		enhancement facilities⁽⁸⁾	−	15	5,552	15	−	−	−	−	4,519	10,101
	Commitments to extend credit⁽⁹⁾		3,186	10,675	8,445	7,562	4,316	4,579	3,312	39	48,592	90,706
	Obligations related to:
		Lease commitments⁽¹⁰⁾	1	1	1	2	2	6	7	1	−	21
		Other contracts⁽¹¹⁾	11	22	34	33	36	46	138	13	127	460

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

(2) Amounts payable upon demand or notice are considered to have no specified maturity.

(3) The Deposits item is presented in greater detail than it is on the Consolidated Balance Sheet.

(4) Amounts are disclosed according to the remaining contractual maturity of the underlying security.

(5) These amounts mainly include liabilities related to the securitization of mortgage loans.

(6) The Other liabilities item is presented in greater detail than it is on the Consolidated Balance Sheet.

(7) These amounts are unconditionally revocable at the Bank's discretion at any time.

(8) In the event of payment on one of the backstop liquidity facilities, the Bank will receive as collateral government bonds in an amount up to $5.6 billion.

(9) These amounts include $46.7 billion that is unconditionally revocable at the Bank's discretion at any time.

(10) These amounts include leases for which the underlying asset is of low value and leases other than for real estate of less than one year.

(11) These amounts include $0.1 billion in contractual commitments related to the portion of the head office building under construction.

Regulatory Compliance Risk

The transition related to the interest rate benchmark reform continues in many countries, including in Canada. On December 31, 2021, all LIBOR (London Interbank Offered Rates) rates in European, British, Swiss, and Japanese currency as well as the one-week and two-month USD LIBOR rates were discontinued, whereas the other USD LIBOR rates were discontinued as of June 30, 2023. The LIBOR rate administrator (ICE Benchmark Administration Ltd.) will continue to publish a "synthetic" version of LIBOR in British currency for three-month maturities until March 28, 2024, and in U.S. currency for 1-month, 3-month and 6‑month maturities until September 30, 2024, for certain contracts that could not be remedied (commonly known as tough legacy contracts). In Canada, publication of CDOR (Canadian Dollar Offered Rate) will be discontinued on June 28, 2024 and replaced by the risk-free rate CORRA (Canadian Overnight Repo Rate Average). A forward-looking rate, the 1-month and 3-month Term CORRA has also been available for certain financial products since September 5, 2023. As at January 31, 2024, the transition project was progressing according to schedule. For additional information, see Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2023.

Risk Disclosures

One of the purposes of the 2023 Annual Report, the Report to Shareholders - First Quarter 2024, and the related supplementary information documents is to provide transparent, high-quality risk disclosures in accordance with the recommendations made by the Financial Stability Board's EDTF group. The following table lists the references where users can find information that responds to the EDTF's 32 recommendations.

							Pages
					2023 Annual Report	Report to Shareholders⁽¹⁾	Supplementary Regulatory Capital and Pillar 3 Disclosure⁽¹⁾
General
	1	Location of risk disclosures			12	41
			Management's Discussion and Analysis		53 to 106, 119 and 121 to 123	20 to 40
			Consolidated Financial Statements		Notes 1, 7, 16, 23 and 29	Notes 6 and 11
			Supplementary Financial Information				27 to 37⁽²⁾
			Supplementary Regulatory Capital and Pillar 3 Disclosure				5 to 59
	2	Risk terminology and risk measures			62 to 106
	3	Top and emerging risks			24 and 67 to 73	10, 26 to 40
	4	New key regulatory ratios			54 to 57, 91 and 95 to 98	20, 21, 31 and 33 to 36
Risk governance and risk management
	5	Risk management organization, processes and key functions			65 to 85, 91 to 93 and 98
	6	Risk management culture			62 and 63
	7	Key risks by business segment, risk management and risk appetite			61 to 63 and 67
	8	Stress testing			53, 63, 79, 89, 90 and 93
Capital adequacy and risk-weighted assets (RWA)
	9	Minimum Pillar 1 capital requirements			54 to 57	20 and 21
	10	Reconciliation of the accounting balance sheet to
			the regulatory balance sheet				11 to 17, 20 and 21
	11	Movements in regulatory capital			59	23
	12	Capital planning			53 to 61
	13	RWA by business segment and by risk type			61		7 and 8
	14	Capital requirements by risk and the RWA calculation method			74 to 78		7 and 8
	15	Banking book credit risk					7 and 8
	16	Movements in RWA by risk type			60	24	7 and 8
	17	Assessment of credit risk model performance			66, 75 to 78 and 84		41
Liquidity
	18	Liquidity management and components of the liquidity buffer			91 to 98	31 to 36
Funding
	19	Summary of encumbered and unencumbered assets			94 and 95	33
	20	Residual contractual maturities of balance sheet items and
			off-balance-sheet commitments		224 to 228	37 to 40
	21	Funding strategy and funding sources			98 to 100	36
Market risk
	22	Linkage of market risk measures to balance sheet			86 and 87	28 and 29
	23	Market risk factors			84 to 90, 212 and 213	28 to 31
	24	VaR: Assumptions, limitations and validation procedures			88
	25	Stress tests, stressed VaR and backtesting			84 to 90
Credit risk
	26	Credit risk exposures			83 and 173 to 184	27 and 63 to 71	22 to 50 and 22 to 30⁽²⁾
	27	Policies for identifying impaired loans			80, 81, 147 and 148
	28	Movements in impaired loans and allowances for credit losses		119, 122, 123 and 173 to 184		63 to 71	27 to 30⁽²⁾
	29	Counterparty credit risk relating to derivative transactions			80 to 82 and 192 to 195		42 to 50, 31⁽²⁾ and 32⁽²⁾
	30	Credit risk mitigation			77 to 82, 170 and 178		24, 28, 29 and 48 to 58
Other risks
	31	Other risks: Governance, measurement and management			72 to 74 and 100 to 106
	32	Publicly known risk events			24, 100 and 101	10, 26 and 40

(1) First quarter 2024.

(2) These pages are included in the document entitled Supplementary Financial Information - First Quarter 2024.

Accounting Policies and Financial Disclosure

Accounting Policies and Critical Accounting Estimates

The Bank's consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). The financial statements also comply with section 308(4) of the Bank Act (Canada), which states that, except as otherwise specified by OSFI, the consolidated financial statements are to be prepared in accordance with IFRS. IFRS represent Canadian generally accepted accounting principles (GAAP). None of the OSFI accounting requirements are exceptions to IFRS. The unaudited interim condensed consolidated financial statements for the quarter ended January 31, 2024 were prepared in accordance with IAS 34 - Interim Financial Reporting using the same accounting policies as those described in Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2023, except for the changes described in Note 2 to the unaudited interim condensed consolidated financial statements, which have been applied since November 1, 2023 upon the adoption of IFRS 17 - Insurance Contracts.

In preparing consolidated financial statements in accordance with IFRS, management must exercise judgment and make estimates and assumptions that affect the reporting date carrying amounts of assets and liabilities, net income, and related information. Some accounting policies are considered critical given their importance to the presentation of the Bank's financial position and operating results and require subjective and complex judgments and estimates on matters that are inherently uncertain. Any change in these judgments and estimates could have a significant impact on the Bank's consolidated financial statements. The critical accounting estimates are the same as those described on pages 107 to 112 of the 2023 Annual Report.

The geopolitical landscape (notably, the Russia-Ukraine war and the clashes between Hamas and Israel), inflation, climate change, and higher interest rates continue to create uncertainty. Some of the Bank's accounting policies, such as measurement of expected credit losses (ECLs), require particularly complex judgments and estimates. See Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2023 for a summary of the most significant estimation processes used to prepare the consolidated financial statements in accordance with IFRS and for the valuation techniques used to determine the carrying values and fair values of assets and liabilities. The uncertainty regarding certain key inputs used in measuring ECLs is described in Note 6 to these unaudited interim condensed consolidated financial statements.

Financial Disclosure

During the first quarter of 2024, no changes were made to the policies, procedures, and other processes that comprise the Bank's internal control over financial reporting that had or could reasonably have a significant impact on the internal control over financial reporting.

Quarterly Financial Information

(millions of Canadian dollars,
	except per share amounts)		2024				2023⁽¹⁾	2022			2023⁽¹⁾	2022
			Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Total	Total
Total revenues			2,710	2,560	2,490	2,446	2,562	2,334	2,413	2,439	10,058	9,652
Net income			922	751	830	832	876	738	826	889	3,289	3,383
Earnings per share ($)
	Basic		2.61	2.11	2.35	2.37	2.49	2.10	2.38	2.56	9.33	9.72
	Diluted		2.59	2.09	2.33	2.34	2.47	2.08	2.35	2.53	9.24	9.61
Dividends per common share ($)			1.06	1.02	1.02	0.97	0.97	0.92	0.92	0.87	3.98	3.58
Return on common
	shareholders' equity (%)⁽²⁾		17.1	14.1	16.1	17.2	17.9	15.3	17.9	20.7	16.3	18.8
Total assets			433,927	423,477	425,936	417,614	418,287	403,740	386,833	369,570
Net impaired loans excluding POCI loans⁽²⁾			677	606	537	477	476	479	301	293
Per common share ($)
	Book value⁽²⁾		61.18	60.40	58.53	57.45	55.76	55.24	54.29	52.28
	Share price
		High	103.38	103.58	103.28	103.45	99.95	94.37	97.87	104.59
		Low	86.50	84.97	94.62	92.67	91.02	83.12	83.33	89.33

(1) For the fiscal 2023 comparative figures, certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

(2) See the Glossary section on pages 43 to 46 for details on the composition of these measures.

Glossary

Acceptances

Acceptances and the customers' liability under acceptances constitute a guarantee of payment by a bank and can be traded in the money market. The Bank earns a "stamping fee" for providing this guarantee.

Allowances for credit losses

Allowances for credit losses represent management's unbiased estimate of expected credit losses as at the balance sheet date. These allowances are primarily related to loans and off-balance-sheet items such as loan commitments and financial guarantees.

Assets under administration

Assets in respect of which a financial institution provides administrative services on behalf of the clients who own the assets. Such services include custodial services, collection of investment income, settlement of purchase and sale transactions, and record-keeping. Assets under administration are not reported on the balance sheet of the institution offering such services.

Assets under management

Assets managed by a financial institution and that are beneficially owned by clients. Management services are more comprehensive than administrative services and include selecting investments or offering investment advice. Assets under management, which may also be administered by the financial institution, are not reported on the balance sheet of the institution offering such services.

Available TLAC

Available TLAC includes total capital as well as certain senior unsecured debt subject to the federal government's bail-in regulations that satisfy all of the eligibility criteria in OSFI's Total Loss Absorbing Capacity (TLAC) Guideline.

Average interest-bearing assets

Average interest-bearing assets include interest-bearing deposits with financial institutions and certain cash items, securities, securities purchased under reverse repurchase agreements and securities borrowed, and loans, while excluding customers' liability under acceptances and other assets. The average is calculated based on the daily balances for the period.

Average interest-bearing assets, non-trading

Average interest-bearing assets, non-trading, include interest-bearing deposits with financial institutions and certain cash items, securities purchased under reverse repurchase agreements and securities borrowed, and loans, while excluding other assets and assets related to trading activities. The average is calculated based on the daily balances for the period.

Average volumes

Average volumes represent the average of the daily balances for the period of the consolidated balance sheet items.

Basic earnings per share

Basic earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average basic number of common shares outstanding.

Basis point (bps)

Unit of measure equal to one one-hundredth of a percentage point (0.01%).

Book value of a common share

The book value of a common share is calculated by dividing common shareholders' equity by the number of common shares on a given date.

Common Equity Tier 1 (CET1) capital ratio

CET1 capital consists of common shareholders' equity less goodwill, intangible assets, and other capital deductions. The CET1 capital ratio is calculated by dividing total CET1 capital by the corresponding risk-weighted assets.

Compound annual growth rate (CAGR)

CAGR is a rate of growth that shows, for a period exceeding one year, the annual change as though the growth had been constant throughout the period.

Derivative financial instruments

Derivative financial instruments are financial contracts whose value is derived from an underlying interest rate, exchange rate, equity, commodity price, credit instrument or index. Examples of derivatives include swaps, options, forward rate agreements, and futures. The notional amount of the derivative is the contract amount used as a reference point to calculate the payments to be exchanged between the two parties, and the notional amount itself is generally not exchanged by the parties.

Diluted earnings per share

Diluted earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding after taking into account the dilution effect of stock options using the treasury stock method and any gain (loss) on the redemption of preferred shares.

Dividend payout ratio

The dividend payout ratio represents the dividends of common shares (per share amount) expressed as a percentage of basic earnings per share.

Economic capital

Economic capital is the internal measure used by the Bank to determine the capital required for its solvency and to pursue its business operations. Economic capital takes into consideration the credit, market, operational, business and other risks to which the Bank is exposed as well as the risk diversification effect among them and among the business segments. Economic capital thus helps the Bank to determine the capital required to protect itself against such risks and ensure its long-term viability.

Efficiency ratio

The efficiency ratio represents non-interest expenses expressed as a percentage of total revenues. It measures the efficiency of the Bank's operations.

Fair value

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal market at the measurement date under current market conditions (i.e., an exit price).

Gross impaired loans as a percentage of total loans and acceptances

This measure represents gross impaired loans expressed as a percentage of the balance of loans and acceptances.

Gross impaired loans excluding POCI loans

Gross impaired loans excluding POCI loans are all loans classified in Stage 3 of the expected credit loss model excluding POCI loans.

Gross impaired loans excluding POCI loans as a percentage of total loans and acceptances

This measure represents gross impaired loans excluding POCI loans expressed as a percentage of the balance of loans and acceptances.

Hedging

The purpose of a hedging transaction is to modify the Bank's exposure to one or more risks by creating an offset between changes in the fair value of, or the cash flows attributable to, the hedged item and the hedging instrument.

Impaired loans

The Bank considers a financial asset, other than a credit card receivable, to be credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred or when contractual payments are 90 days past due. Credit card receivables are considered credit-impaired and are fully written off at the earlier of the following dates: when a notice of bankruptcy is received, a settlement proposal is made, or contractual payments are 180 days past due.

Leverage ratio

The leverage ratio is calculated by dividing Tier 1 capital by total exposure. Total exposure is defined as the sum of on-balance-sheet assets (including derivative financial instrument exposures and securities financing transaction exposures) and off-balance-sheet items.

Liquidity coverage ratio (LCR)

The LCR is a measure designed to ensure that the Bank has sufficient high-quality liquid assets to cover net cash outflows given a severe, 30‑day liquidity crisis.

Loans and acceptances

Loans and acceptances represent the sum of loans and of the customers' liability under acceptances.

Loan-to-value ratio

The loan-to-value ratio is calculated according to the total facility amount for residential mortgages and home equity lines of credit divided by the value of the related residential property.

Master netting agreement

Legal agreement between two parties that have multiple derivative contracts with each other that provides for the net settlement of all contracts through a single payment, in the event of default, insolvency or bankruptcy.

Net impaired loans

Net impaired loans are gross impaired loans presented net of allowances for credit losses on Stage 3 loan amounts drawn.

Net impaired loans as a percentage of total loans and acceptances

This measure represents net impaired loans as a percentage of the balance of loans and acceptances.

Net impaired loans excluding POCI loans

Net impaired loans excluding POCI loans are gross impaired loans excluding POCI loans presented net of allowances for credit losses on amounts drawn on Stage 3 loans granted by the Bank.

Net interest income from trading activities

Net interest income from trading activities comprises dividends related to financial assets and liabilities associated with trading activities, net of interest expenses and interest income related to the financing of these financial assets and liabilities.

Net interest income, non-trading

Net interest income, non-trading, comprises revenues related to financial assets and liabilities associated with non-trading activities, net of interest expenses and interest income related to the financing of these financial assets and liabilities.

Net interest margin

Net interest margin is calculated by dividing net interest income by average interest-bearing assets.

Net stable funding ratio (NSFR)

The NSFR ratio is a measure that helps guarantee that the Bank is maintaining a stable funding profile to reduce the risk of funding stress.

Net write-offs as a percentage of average loans and acceptances

This measure represents the net write-offs (net of recoveries) expressed as a percentage of average loans and acceptances.

Non-interest income related to trading activities

Non-interest income related to trading activities consists of realized and unrealized gains and losses as well as interest income on securities measured at fair value through profit or loss, income from held-for-trading derivative financial instruments, changes in the fair value of loans at fair value through profit or loss, changes in the fair value of financial instruments designated at fair value through profit or loss, certain commission income, other trading activity revenues, and any applicable transaction costs.

Office of the Superintendent of Financial Institutions (Canada) (OSFI)

The mandate of OSFI is to regulate and supervise financial institutions and private pension plans subject to federal oversight, to help minimize undue losses to depositors and policyholders and, thereby, to contribute to public confidence in the Canadian financial system.

Operating leverage

Operating leverage is the difference between the growth rate for total revenues and the growth rate for non-interest expenses.

Provisioning rate

This measure represents the allowances for credit losses on impaired loans expressed as a percentage of gross impaired loans.

Provisioning rate excluding POCI loans

This measure represents the allowances for credit losses on impaired loans excluding POCI loans expressed as a percentage of gross impaired loans excluding POCI loans.

Provisions for credit losses

Amount charged to income necessary to bring the allowances for credit losses to a level deemed appropriate by management and is comprised of provisions for credit losses on impaired and non-impaired financial assets.

Provisions for credit losses as a percentage of average loans and acceptances

This measure represents the provisions for credit losses expressed as a percentage of average loans and acceptances.

Provisions for credit losses on impaired loans as a percentage of average loans and acceptances

This measure represents the provisions for credit losses on impaired loans expressed as a percentage of average loans and acceptances.

Provisions for credit losses on impaired loans excluding POCI loans as a percentage of average loans and acceptances or provisions for credit losses on impaired loans excluding POCI loans ratio

This measure represents the provisions for credit losses on impaired loans excluding POCI loans expressed as a percentage of average loans and acceptances.

Return on average assets

Return on average assets represents net income expressed as a percentage of average assets.

Return on common shareholders' equity (ROE)

ROE represents net income attributable to common shareholders expressed as a percentage of average equity attributable to common shareholders. It is a general measure of the Bank's efficiency in using equity.

Risk-weighted assets

Assets are risk weighted according to the guidelines established by OSFI. In the Standardized calculation approach, risk factors are applied directly to the face value of certain assets in order to reflect comparable risk levels. In the Advanced Internal Ratings-Based (AIRB) Approach, risk-weighted assets are derived from the Bank's internal models, which represent the Bank's own assessment of the risks it incurs. In the Foundation Internal Ratings-Based (FIRB) Approach, the Bank can use its own estimate of probability of default but must rely on OSFI estimates for the loss given default and exposure at default risk parameters. Off-balance-sheet instruments are converted to balance sheet (or credit) equivalents by adjusting the notional values before applying the appropriate risk-weighting factors.

Securities purchased under reverse repurchase agreements

Securities purchased by the Bank from a client pursuant to an agreement under which the securities will be resold to the same client on a specified date and at a specified price. Such an agreement is a form of short-term collateralized lending.

Securities sold under repurchase agreements

Financial obligations related to securities sold pursuant to an agreement under which the securities will be repurchased on a specified date and at a specified price. Such an agreement is a form of short-term funding.

Stressed VaR (SVaR)

SVaR is a statistical measure of risk that replicates the VaR calculation method but uses, instead of a two-year history of risk factor changes, a 12‑month data period corresponding to a continuous period of significant financial stress that is relevant in terms of the Bank's portfolios.

Structured entity

A structured entity is an entity created to accomplish a narrow and well-defined objective and is designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate solely to administrative tasks and the relevant activities are directed by means of contractual arrangements.

Taxable equivalent basis

Taxable equivalent basis is a calculation method that consists of grossing up certain revenues taxed at lower rates (notably dividends) by the income tax to a level that would make it comparable to revenues from taxable sources in Canada. The Bank uses the taxable equivalent basis to calculate net interest income, non-interest income and income taxes.

Tier 1 capital ratio

Tier 1 capital ratio consists of Common Equity Tier 1 capital and Additional Tier 1 instruments, namely, qualifying non-cumulative preferred shares and the eligible amount of innovative instruments. Tier 1 capital ratio is calculated by dividing Tier 1 capital, less regulatory adjustments, by the corresponding risk-weighted assets.

TLAC leverage ratio

The TLAC leverage ratio is an independent risk measure that is calculated by dividing available TLAC by total exposure, as set out in OSFI's Total Loss Absorbing Capacity (TLAC) Guideline.

TLAC ratio

The TLAC ratio is a measure used to assess whether a non-viable Domestic Systemically Important Bank (D-SIB) has sufficient loss-absorbing capacity to support its recapitalization. It is calculated by dividing available TLAC by risk weighted assets, as set out in OSFI's Total Loss Absorbing Capacity (TLAC) Guideline.

Total capital ratio

Total capital is the sum of Tier 1 and Tier 2 capital. Tier 2 capital consists of the eligible portion of subordinated debt and certain allowances for credit losses. The Total capital ratio is calculated by dividing Total capital, less regulatory adjustments, by the corresponding risk-weighted assets.

Total shareholder return (TSR)

TSR represents the average total return on an investment in the Bank's common shares. The return includes changes in share price and assumes that the dividends received were reinvested in additional common shares of the Bank.

Trading activity revenues

Trading activity revenues consist of the net interest income and the non-interest income related to trading activities. Net interest income comprises dividends related to financial assets and liabilities associated with trading activities, and some interest income related to the financing of these financial assets and liabilities net of interest expenses and interest income related to the financing of these financial assets and liabilities. Non-interest income consists of realized and unrealized gains and losses as well as interest income on securities measured at fair value through profit or loss, income from held-for-trading derivative financial instruments, changes in the fair value of loans at fair value through profit or loss, changes in the fair value of financial instruments designated at fair value through profit or loss, realized and unrealized gains and losses as well as interest expense on obligations related to securities sold short, certain commission income, other trading activity revenues, and any applicable transaction costs.

Value-at-Risk (VaR)

VaR is a statistical measure of risk that is used to quantify market risks across products, per types of risks, and aggregate risk on a portfolio basis. VaR is defined as the maximum loss at a specific confidence level over a certain horizon under normal market conditions. The VaR method has the advantage of providing a uniform measurement of financial instrument-related market risks based on a single statistical confidence level and time horizon.

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