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National Bank reports its 2021 annual and fourth-quarter results and raises its quarterly dividend by 16 cents to 87 cents per share

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·12 min read
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  • NA-PC.TO
  • NA-PE.TO
  • NA-PG.TO
  • NA-PS.TO
  • NA-PW.TO
  • NA.TO

The financial information reported in this document is based on the unaudited interim condensed consolidated financial statements for the fourth quarter of fiscal 2021 and on the audited annual consolidated financial statements for the year ended October 31, 2021 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, Dec. 1, 2021 /CNW Telbec/ - For the fourth quarter of 2021, National Bank is reporting net income of $776 million compared to $492 million in the fourth quarter of 2020. Fourth-quarter diluted earnings per share stood at $2.19 compared to $1.36 in the fourth quarter of 2020. These increases were driven by total revenue growth in most of the business segments, by reversals of allowances for credit losses on non-impaired loans owing to improvements in the macroeconomic outlook and in credit conditions as well as by a reduction in provisions for credit losses on impaired loans compared to the fourth quarter of 2020. Income before provisions for credit losses and income taxes totalled $953 million in the fourth quarter of 2021 compared to $741 million in the fourth quarter of 2020, a 29% increase arising from good performance in most of the business segments, tempered by a year-over-year fourth-quarter slowdown in the Financial Markets segment.

Logo: National Bank of Canada (CNW Group/National Bank of Canada)
Logo: National Bank of Canada (CNW Group/National Bank of Canada)

For the year ended October 31, 2021, the Bank's net income totalled $3,177 million compared to $2,083 million in fiscal 2020, and its fiscal 2021 diluted earnings per share stood at $8.96 versus $5.70 in fiscal 2020.These increases were due to a significant year-over-year decrease in provisions for credit losses on non-impaired loans, as macroeconomic and credit conditions improved from those in fiscal 2020, as well as to a significant reduction in provisions for credit losses on impaired loans. Also contributing to the growth in net income and diluted earnings per share was the excellent performance turned in by all the Bank's business segments, notably achieved through revenue growth. For fiscal 2021, income before provisions for credit losses and income taxes totalled $4,074 million, a 20% year-over-year increase driven by revenue growth across all the business segments.

''The Bank delivered outstanding results in fiscal 2021. We generated superior organic growth and an industry-leading return on equity while maintaining strong capital levels and prudent allowances for credit losses. The Bank's sustained performance reinforces our commitment to continue pursuing fitting strategies in terms of business mix, capital allocation, and risk management. We enter the new year on strong footing, well-positioned to generate solid growth across our business segments and deliver superior returns to our shareholders,'' said Laurent Ferreira, President and Chief Executive Officer of National Bank of Canada.

Highlights

(millions of Canadian dollars)



Quarter ended October 31



Year ended October 31






2021




2020



% Change



2021




2020



% Change

























Net income



776




492



58



3,177




2,083



53


Diluted earnings per share (dollars)


$

2.19



$

1.36



61


$

8.96



$

5.70



57


Income before provisions for credit losses and income taxes



953




741



29



4,074




3,382



20


Return on common shareholders' equity(1)



18.7

%



13.7

%





20.7

%



14.9

%




Dividend payout ratio(1)



31.4

%



49.6

%





31.4

%



49.6

%



























Excluding specified items (2)






















Net income excluding specified items



783




615



27



3,184




2,216



44


Diluted earnings per share excluding specified items (dollars)


$

2.21



$

1.69



31


$

8.98



$

6.06



48


Return on common shareholders' equity























excluding specified items(3)



18.9

%



17.1

%





20.8

%



15.8

%




Dividend payout ratio excluding specified items(3)



31.3

%



46.6

%





31.3

%



46.6

%








































As at

October 31,

2021



As at

October 31, 2020





CET1 capital ratio under Basel III(4)













12.4

%



11.8

%




Leverage ratio under Basel III(4)













4.4

%



4.4

%




(1)

For additional information on supplementary financial measures composition, see the Glossary section on pages 123 to 126 of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

(2)

For additional information on non-GAAP financial measures, see the Financial Reporting Method section on pages 2 to 5.

(3)

For additional information on non-GAAP ratios, see the Financial Reporting Method section and the Glossary section on pages 18 to 21 and on pages 123 to 126, respectively, of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

(4)

For additional information on capital management measures, see the Financial Reporting Method section on pages 18 to 21 of the MD&A in the Bank's 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com

COVID-19 Pandemic

On March 11, 2020, the World Health Organization (WHO) declared that the COVID-19 outbreak constituted a pandemic, requiring important protective measures to be taken to prevent overcrowding of health services and to strengthen preventive hygiene. This global pandemic prompted many countries, including Canada, to implement lockdown and social distancing measures designed to prevent new outbreaks. In many countries, those measures included the closing of aerial, maritime, and land borders.

During the summer of 2020, some of the restrictions imposed at the start of the pandemic were eased, but subsequent waves of COVID-19 in autumn 2020 forced authorities in a number of countries, including Canada, to reintroduce lockdown measures, effectively shutting down parts of the economy again. During the winter of 2021, a vaccination campaign began in Canada and picked up steam in the spring, leading to a reopening in early summer 2021. The authorities in many countries, including Canada, actively worked to ensure that widespread vaccination coverage was achieved as quickly as possible. However, uncertainty remains regarding the long-term effectiveness of the vaccines, the acceptance thereof by the public, and the anticipated reduction of infection rates, especially given a rise in cases linked to COVID-19 variants, which appear to be more contagious. Certain measures by the public health authorities in Canada are expected to remain in place to continue limiting the spread of COVID-19 and its variants.

In Canada, banking services are considered essential services and were therefore maintained despite the lockdown and social distancing measures. Given the current economic and social conditions, the Bank is committed to supporting its employees, clients, and communities.

The Bank is continuing to closely monitor the potential impacts of the COVID-19 pandemic. It is not possible to predict the full impacts that the pandemic will have on the global economy, on the countries in which the Bank operates, on the Bank's clients, and on the Bank itself, including its business activities, results of operations, financial position, regulatory capital and liquidity ratios, reputation, and ability to satisfy regulatory requirements. The actual impacts will depend on future events that are highly uncertain, including the extent, severity, and duration of the COVID-19 pandemic, and on the effectiveness of actions and measures taken by governments, monetary authorities, and regulators over the long term.

For additional information on the impact of the COVID-19 risk factor, on relief measures offered to the Bank's clients, and on the measures introduced by regulators, see the COVID-19 Pandemic section on pages 16 to 18 of the 2021 Annual Report.

A number of the relief measures offered to the Bank's clients at the start of the pandemic ended in 2020, although some measures were being offered as part of various government programs in which the Bank is participating. These measures consist mainly of loans backed by government guarantees, particularly for businesses operating in sectors hit hardest by the pandemic. In the normal course of business, the Bank is continuing to address the specific needs of its clients to support them during this unprecedented crisis.

Financial Reporting Method

On November 1, 2020, the Bank amended the classification of certain Consolidated Statement of Income amounts to better reflect the nature of the revenues reported in the Wealth Management segment. The reclassifications were made retrospectively among the Non-interest income items and had no impact on the total revenues or on Net income.

Non-GAAP Financial Measures 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;

  • segment 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 assess results without the specified items if they consider such items not to be reflective of the underlying performance of the Bank's operations. The Bank excludes from its results certain specified items that are inherently unpredictable. In addition, like many other financial institutions, 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 tax-exempt income (particularly dividends) by the income tax that would have been otherwise payable. 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.

For additional information on non-GAAP financial measures, on non-GAAP ratios, on supplementary financial measures, on capital management measures and on segment measures, see the Financial Reporting Method section and the Glossary section, on pages 18 to 21 and 123 to 126, respectively, of the MD&A in the 2021 Annual Report, which is available on the Bank's website at nbc.ca or the SEDAR website at sedar.com.

Reconciliation of Non-GAAP Financial Measures

Presentation of Results on a Taxable Equivalent Basis and Excluding Specified Items

Quarter ended October 31















(millions of Canadian dollars)











2021


2020




Personal and
Commercial


Wealth
Management


Financial
Markets


USSF&I


Other

































Net interest income

661


115


243


241


(70)


1,190


1,124


Taxable equivalent



38



1


39


46


Net interest income on a taxable equivalent basis

661


115


281


241


(69)


1,229


1,170


















Non-interest income

284


447


199


1


90


1,021


876


Taxable equivalent



2




2


3


Foreign currency translation loss on disposal of subsidiaries(1)







24


Non-interest income on a taxable equivalent basis and

excluding specified items

284


447


201


1


90


1,023


903


















Total revenues on a taxable equivalent basis and

excluding specified items

945


562


482


242


21


2,252


2,073


Non-interest expenses

503


337


206


76


136


1,258


1,259


Impairment losses on premises and equipment and

on intangible assets(2)





(9)


(9)


(71)


Severance pay(3)







(48)


Non-interest expenses excluding specified items

503


337


206


76


127


1,249


1,140


















Income before provisions for credit losses and income

taxes on a taxable equivalent basis and excluding specified items

442


225


276


166


(106)


1,003


933


Provisions for credit losses

(38)


1


(7)


3



(41)


110


Income before income taxes on a taxable equivalent basis















and excluding specified items

480


224


283


163


(106)


1,044


823


Income taxes

127


59


35


34


(37)


218


139


Taxable equivalent



40



1


41


49


Income taxes on foreign currency translation loss on disposal of subsidiaries(1)







(12)


Income taxes related to impairment losses on premises and equipment and on intangible assets(2)





2


2


19


Income taxes on severance pay(3)







13


Income taxes on a taxable equivalent basis and

excluding specified items

127


59


75


34


(34)


261


208


Net income excluding specified items

353


165


208


129


(72)


783


615


Specified items after income taxes





(7)


(7)


(123)


Net income

353


165


208


129


(79)


776


492


Non-controlling interests







2


Non-controlling interests on the foreign currency translation loss on disposal of subsidiaries(1)







10


Non-controlling interests excluding specified items







12


















Net income attributable to the Bank ' s shareholders

and holders of other equity instruments

353


165


208


129


(79)


776


490


Net income attributable to the Bank ' s shareholders

and holders of other equity instruments excluding specified items

353


165


208


129


(72)


783


603


(1)

During the quarter ended October 31, 2020, the Bank, through its subsidiary Credigy Ltd.(Credigy), had recorded a foreign currency translation loss on investments in foreign operations of $24 million ($36 million taking into account income taxes and $26 million taking into account income taxes and non-controlling interests) following a disposal of two subsidiaries in Brazil.

(2)

During the quarter ended October 31, 2021, the Bank recorded $9 million ($7 million net of income taxes) in impairment losses on intangible assets related to technology developments. During the quarter ended October 31, 2020, the Bank had recorded $71 million ($52 million net of income taxes) in impairment losses on premises and equipment and on intangible assets related to computer equipment and technology developments.

(3)

During the quarter ended October 31, 2020, following an optimization of certain organizational structures, the Bank had recorded $48 million ($35 million net of income taxes) in severance pay.

Year ended October 31















(millions of Canadian dollars)











2021


2020




Personal and
Commercial


Wealth
Management


Financial
Markets


USSF&I


Other

































Net interest income

2,583


448


1,051


907


(206)


4,783


4,255


Taxable equivalent



175



6


181


208


Net interest income on a taxable equivalent basis

2,583


448


1,226


907


(200)


4,964


4,463


















Non-interest income

1,103


1,721


912


94


314


4,144


3,672


Taxable equivalent



8




8


57


Foreign currency translation loss on disposal of subsidiaries(1)







24


Non-interest income on a taxable equivalent basis and

excluding specified items

1,103


1,721


920


94


314


4,152


3,753


















Total revenues on a taxable equivalent basis and

excluding specified items

3,686


2,169


2,146


1,001


114


9,116


8,216


Non-interest expenses

1,958


1,277


880


315


423


4,853


4,545


Impairment losses on premises and equipment and

on intangible assets(2)





(9)


(9)


(71)


Severance pay(3)







(48)


Charge related to Maple(4)







(13)


Non-interest expenses excluding specified items

1,958


1,277


880


315


414


4,844


4,413











...

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