Mr. Laurent Ferreira reports

NATIONAL BANK REPORTS ITS 2023 FOURTH-QUARTER AND ANNUAL RESULTS AND RAISES ITS QUARTERLY DIVIDEND BY 4 CENTS TO $1.06 PER SHARE

For the fourth quarter of 2023, National Bank of Canada had net income of $768-million, up 4 per cent from $738-million in the fourth quarter of 2022. Fourth quarter diluted earnings per share stood at $2.14 compared with $2.08 in the fourth quarter of 2022. These fourth quarter increases were driven by year-over-year growth in total revenues in all the business segments, partly offset by higher non-interest expenses and higher provisions for credit losses. As for fourth quarter adjusted net income, which excludes specified items, it totalled $867-million, rising 17 per cent year-over-year from $738-million, while fourth quarter adjusted diluted earnings per share stood at $2.44 versus $2.08 in the fourth quarter of 2022.

For the year ended Oct. 31, 2023, the bank's net income totalled $3,335-million, down 1 per cent from $3,383-million in fiscal 2022, and its diluted earnings per share stood at $9.38 in fiscal 2023 versus $9.61 in fiscal 2022. Revenue growth in all of the business segments was more than offset by higher non-interest expenses (partly due to the specified items recorded during fiscal 2023) and by notably higher provisions for credit losses. The fiscal 2023 income before provisions for credit losses and income taxes was down 1 per cent compared with fiscal 2022. As for adjusted net income in fiscal 2023, it totalled $3,409-million, up 1 per cent from $3,383-million in fiscal 2022, while adjusted diluted earnings per share stood at $9.60 versus $9.61 in fiscal 2022. The fiscal 2023 specified items had a $74-million unfavourable impact on net income in fiscal 2023. As for adjusted income before provisions for credit losses and income taxes, it rose 7 per cent year-over-year.

"Through strong execution, organic growth and tight expense management, we delivered solid financial results, generated an excellent return on equity and maintained robust capital levels in 2023," said Laurent Ferreira, president and chief executive officer of National Bank of Canada. He added: "As we enter 2024, we remain committed to our prudent and disciplined approach to capital, credit and cost management. Our defensive posture, coupled with the earnings power of our diversified business mix, positions us well to create sustainable long-term value for our stakeholders in an environment where the outlook for economic growth remains challenging."

Financial analysis

This press release should be read in conjunction with the 2023 annual report (which includes the audited annual consolidated financial statements and management's discussion and analysis) available on the bank's website. Additional information about the bank, including the annual information form, can be obtained from the bank's website or SEDAR+'s website.

Total revenues

For the fourth quarter of 2023, the bank's total revenues amounted to $2,594-million, up $260-million or 11 per cent from the fourth quarter of 2022. In the personal and commercial segment, fourth quarter total revenues rose 8 per cent year-over-year owing to growth in loans and deposits, a higher net interest margin resulting from interest rate hikes, and an increase in insurance revenues, partly offset by a decrease in revenues from foreign exchange activities. In the wealth management segment, fourth quarter total revenues grew 4 per cent year-over-year, essentially due to higher fee-based revenues, notably from investment management and trust service fees as well as revenues from mutual funds. In the financial markets segment, fourth quarter total revenues on a taxable equivalent basis increased by 31 per cent year-over-year due to increases in global markets revenues and in corporate and investment banking revenues. In the U.S. specialty finance and international (USSF&I) segment, fourth quarter total revenues were up 17 per cent year-over-year owing to higher revenues generated by the Credigy subsidiary as well to sustained revenue growth at the ABA Bank subsidiary as a result of business growth. For the other heading, fourth quarter total revenues were down year-over-year due to lower gains on investments, partly offset by a higher contribution from treasury activities.

For the year ended Oct. 31, 2023, total revenues amounted to $10,170-million, up $518-million or 5 per cent from $9,652-million in fiscal 2022. In the personal and commercial segment, the fiscal 2023 total revenues rose $482-million or 12 per cent year-over-year as net interest income increased owing to loan and deposit growth, a higher net interest margin arising from interest rate hikes, and increases in credit card revenues, insurance revenues and revenues from bankers' acceptances, partly offset by a decrease in revenues from foreign exchange activities. In the wealth management segment, the fiscal 2023 total revenues grew 6 per cent, mainly due to an increase in net interest income, partly offset by a decrease in transaction-based and other revenues. In the financial markets segment, the fiscal 2023 total revenues on a taxable equivalent basis were up $188-million or 8 per cent year-over-year given growth in corporate and investment banking revenues, partly offset by a decrease in global markets revenues. In the USSF&I segment, the fiscal 2023 total revenues were up 9 per cent year-over-year owing to revenue growth at ABA Bank as a result of business growth as well as to an increase in Credigy's revenues. For the other heading, the fiscal 2023 total revenues were down year-over-year due to lower gains on investments in fiscal 2023, partly offset by a higher contribution from treasury activities and a $91-million gain recorded upon the fair value remeasurement of an equity interest during fiscal 2023. As for adjusted total revenues, they amounted to $10,658-million in fiscal 2023, up 7 per cent year-over-year.

Non-interest expenses

For the fourth quarter of 2023, non-interest expenses stood at $1,607-million, a 19-per-cent year-over-year increase that resulted from higher compensation and employee benefits, notably due to wage growth and a greater number of employees, as well as from the variable compensation associated with revenue growth. Occupancy, including amortization expense, was also up, partly due to the expanding banking network at ABA Bank as well as to $11-million in impairment losses on premises and equipment recorded in the fourth quarter of 2023. An increase in technology expenses, including amortization, came from the significant investments made to support the bank's technological evolution and business development plan as well as from $75-million in intangible asset impairment losses. Lastly, other expenses were up due to year-over-year increases in advertising expenses, travel expenses (as activities with clients resumed), as well as to $35-million in litigation expenses and $15-million in provisions for contracts. The specified items recorded in non-interest expenses during the fourth quarter of 2023 had an unfavourable impact of $136-million. As for adjusted non-interest expenses, they stood at $1,471-million in the fourth quarter of 2023, up 9 per cent from $1,346-million in fourth quarter 2022.

For the year ended Oct. 31, 2023, the bank's non-interest expenses stood at $5,801-million, up 11 per cent year-over-year. Compensation and employee benefits stood at $3,452-million in fiscal 2023, a 5-per-cent year-over-year increase that was mainly due to wage growth and a greater number of employees. Occupancy expense, including amortization expense, was also up, partly due to the expanding banking network at ABA Bank, to expenses related to the bank's new head office building, and to $11-million in impairment losses on premises and equipment. An increase in technology expenses, including amortization, came from the significant investments made to support the bank's technological evolution and business development plan as well as from the intangible asset impairment losses recorded in fiscal 2023. The fiscal 2023 communication expenses remained relatively stable year-over-year, whereas professional fees were up slightly. Other expenses were also up due to the same reasons as those provided for the quarter as well as to the $20-million reversal of the provision for the compensatory tax on salaries paid in Quebec during fiscal 2022 and a $25-million expense related to changes to the Excise Tax Act recorded in 2023. The specified items recorded in non-interest expenses during fiscal 2023 had an unfavourable impact of $161-million. As for adjusted non-interest expenses, they stood at $5,640-million in fiscal 2023, up $410-million or 8 per cent from non-interest expenses of $5,230-million in fiscal 2022.

Provisions for credit losses

For the fourth quarter of 2023, the bank recorded $115-million in provisions for credit losses compared with $87-million in the fourth quarter of 2022. An increase in provisions for credit losses on non-impaired loans of $23-million was due to the growth in the loan portfolios, the migration of credit risk, the recalibration of certain risk parameters, and the updates and revisions to the probability weightings of scenarios, reflecting the uncertainties in the macroeconomic outlook, uncertainties such as rising inflationary pressure, high interest rates and geopolitical instability. As for fourth quarter provisions for credit losses on impaired loans, excluding purchased or originated credit-impaired (POCI) loans, they rose $19-million year-over-year. This increase came from personal banking (including credit card receivables) and commercial banking, reflecting a normalization of credit performance, and from Credigy (excluding POCI loans). These increases were partly offset by a decrease in provisions for credit losses on impaired loans in the financial markets segment. Provisions for credit losses on POCI loans were down $14-million year-over-year due to favourable remeasurements of certain Credigy portfolios during the fourth quarter of 2023 as well as to recoveries of credit losses following repayments of POCI loans at Commercial Banking.

For fiscal 2023, the bank recorded $397-million in provisions for credit losses compared with $145-million in fiscal 2022. This increase was mainly due to higher provisions for credit losses on non-impaired loans, recorded for the same reasons as those provided for the quarter. As for provisions for credit losses on impaired loans excluding POCI(1) loans, they were also up and came from Personal Banking (including credit card receivables) and Commercial Banking, reflecting a normalization of credit risk, and from the Credigy subsidiary. These increases were tempered by a decrease in provisions for credit losses on impaired loans at ABA Bank. Provisions for credit losses on POCI loans were down year-over-year due to favourable remeasurements of certain Credigy portfolios during fiscal 2023 as well as to recoveries of credit losses following repayments of POCI loans at Commercial Banking.

Income Taxes

For the fourth quarter of 2023, income taxes stood at $104-million compared with $163-million in the same quarter of 2022. The 2023 fourth quarter effective income tax rate was 12 per cent compared with 18 per cent in the same quarter of 2022. The year-over-year change in effective income tax rate stems mainly from a higher level and proportion of tax-exempt dividend income and from higher income in lower-tax-rate jurisdictions, factors that were partly offset by the additional 1.5-per-cent tax on banks and life insurers.

For the year ended Oct. 31, 2023, the effective income tax rate was 16 per cent compared with 21 per cent in fiscal 2022. The year-over-year change in effective income tax rate stems from the same reasons as those mentioned for the quarter, partly offset by the impact of the Canadian government's 2022 tax measures recorded in the first quarter of 2023, namely, the Canada recovery dividend and the additional 1.5-per-cent tax on banks and life insurers.

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 comprises the activities of the Credigy and Advanced Bank of Asia Ltd. (ABA Bank) subsidiaries. Other operating activities, certain specified items, treasury activities and the operations of the Flinks Technology Inc. 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

In the personal and commercial segment, net income totalled $288-million in the fourth quarter of 2023 compared with $335-million in the fourth quarter of 2022, a 14-per-cent year-over-year decrease that was due to higher non-interest expenses (including the specified items recorded in the fourth quarter of 2023) and higher provisions for credit losses. As for the segment's adjusted net income in the fourth quarter of 2023, it totalled $337-million, up 1 per cent year-over-year. Fourth quarter income before provisions for credit losses and income taxes amounted to $462-million, down 7 per cent year-over-year, whereas adjusted income before provisions for credit losses and income taxes rose 7 per cent. Fourth quarter net interest income rose 9 per cent year-over-year owing to growth in personal and commercial loans and deposits as well as to a higher net interest margin, which was 2.36 per cent in fourth quarter 2023 compared with 2.26 per cent in fourth quarter 2022. This growth reflects the interest rate hikes and was mainly attributable to the deposit margin. As for fourth quarter non-interest income, it grew $9-million or 3 per cent year-over-year.

Personal banking's fourth quarter total revenues increased by $51-million year-over-year. This increase came from an increase in net interest income driven by loan and deposit growth, from an improved margin on deposits, and from higher insurance revenues (reflecting revisions to actuarial reserves). Commercial banking's fourth quarter total revenues grew $30-million year-over-year, mainly due to an increase in net interest income that was driven by loan and deposit growth and an improved deposit margin, partly offset by a decrease in revenues from foreign exchange activities.

For the fourth quarter of 2023, personal and commercial's non-interest expenses stood at $690-million, a 20-per-cent year-over-year increase that was mainly due to $68-million in specified items recorded during the quarter. The increase also came from higher compensation and employee benefits (resulting from wage growth), from greater investments made as part of the segment's technological evolution, and from an increase in operations support charges. At 59.9 per cent, the efficiency ratio deteriorated, mainly due to the specified items recorded during the fourth quarter of 2023. As for the segment's adjusted non-interest expenses, they stood at $622-million in the fourth quarter of 2023, up 8 per cent year-over-year. Its adjusted efficiency ratio was 54 per cent compared with 53.6 per cent in the fourth quarter of 2022. The segment recorded $65-million in provisions for credit losses in the fourth quarter of 2023 compared with $42-million in the same quarter of 2022. 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. Fourth quarter provisions for credit losses on non-impaired commercial banking loans were also up year-over-year. Also during the fourth quarter of 2023, the segment recorded recoveries of credit losses on commercial banking's POCI loans as a result of loan repayments.

For fiscal 2023, the personal and commercial segment's net income totalled $1,282-million compared with $1,247-million in fiscal 2022, a 3-per-cent year-over-year increase that was driven by growth of $482-million in the segment's total revenues, partly offset by higher non-interest expenses (including the fiscal 2023 specified items) and by notably higher provisions for credit losses. As for the segment's adjusted net income in fiscal 2023, it totalled $1,331-million, up 7 per cent year-over-year. For fiscal 2023, the segment's income before provisions for credit losses and income taxes amounted to $2,006-million, up 12 per cent year-over-year, while its adjusted income before provisions for credit losses and income taxes rose 16 per cent. Personal banking's fiscal 2023 total revenues were up 8 per cent year-over-year, mainly due to growth in loans and deposits and to a higher deposit margin (partly offset by a lower margin on loans) as well as to increases in card revenues and insurance revenues. In addition, commercial banking's 2023 total revenues rose 18 per cent owing to growth in loans and deposits, a higher net interest margin, as well as to increases in revenues from bankers' acceptances, partly offset by a decrease in revenues from foreign exchange activities.

For fiscal 2023, the segment's non-interest expenses stood at $2,510-million, a 12-per-cent year-over-year increase that was due to the same reasons provided above for the quarter. At 55.6 per cent, the segment's fiscal 2023 efficiency ratio remained stable compared with last year. As for the segment's adjusted non-interest expenses for fiscal 2023, they stood at $2,442-million, up 9 per cent year-over-year. At 54.1 per cent, the segment's 2023 adjusted efficiency ratio improved by 1.5 percentage points from 55.6 per cent in 2022. The segment recorded $238-million in provisions for credit losses in fiscal 2023, which is $141-million more than the $97-million recorded in fiscal 2022. This increase was 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 the segment's provisions for credit losses on non-impaired loans, they were up due to growth in the loan portfolios, the migration of credit risk and a less favourable macroeconomic outlook during fiscal 2023. Also during fiscal 2023, the segment recorded recoveries of credit losses on commercial banking's POCI loans as a result of loan repayments.

Wealth management

In the wealth management segment, net income totalled $155-million in the fourth quarter of 2023, a 20-per-cent decrease from $193-million in the fourth quarter of 2022, as growth in the segment's total revenues was more than offset by higher non-interest expenses (including the specified items recorded during the fourth quarter of 2023). As for the segment's adjusted net income, it totalled $187-million in the fourth quarter of 2023, down 3 per cent year-over-year. The segment's fourth quarter total revenues amounted to $638-million, up $25-million or 4 per cent from $613-million in the fourth quarter of 2022. The fourth quarter net interest income remained relatively stable year-over-year, with the impact of higher interest rates being offset by changes in deposit mix. Fourth quarter fee-based revenues increased by 7 per cent, mostly due to stronger year-over-year stock market performance. As for fourth quarter transaction-based and other revenues, they remained stable year-over-year.

For the fourth quarter of 2023, the wealth management segment's non-interest expenses stood at $423-million compared with $349-million in the same quarter of 2022, a 21-per-cent year-over-year increase that was due to higher compensation and employee benefits, notably the variable compensation associated with revenue growth, higher technology expenses incurred for the segment's initiatives, higher external management fees, and $43-million in specified items recorded during the quarter. At 66.3 per cent, the fourth quarter efficiency ratio deteriorated year-over-year, partly due to the specified items recorded during the quarter. As for the segment's adjusted non-interest expenses, they stood at $380-million in the fourth quarter of 2023, up 9 per cent year-over-year. And the adjusted efficiency ratio was 59.6 per cent in fourth quarter 2023 versus 56.9 per cent in fourth quarter 2022. The segment recorded $1-million in provisions for credit losses in the fourth quarter of 2023 compared with $2-million in the fourth quarter of 2022.

For fiscal 2023, wealth management's net income totalled $714-million compared with $701-million in fiscal 2022, a 2-per-cent year-over-year increase that was driven by growth in the segment's total revenues, partly offset by higher non-interest expenses (including the fiscal 2023 specified items). As for the segment's adjusted net income in fiscal 2023, it totalled $746-million, up 6 per cent from $701-million in fiscal 2022. The segment's total revenues amounted to $2,521-million in fiscal 2023, up 6 per cent from $2,375-million in fiscal 2022. Its net interest income was also up, rising $184-million or 31 per cent as a result of the interest rate hikes that occurred during fiscal years 2023 and 2022. The fiscal 2023 fee-based revenues remained relatively stable compared with fiscal 2022. As for transaction-based and other revenues, they were down 12 per cent year-over-year given lower commissions on transactions during fiscal 2023. The segment's non-interest expenses stood at $1,534-million in fiscal 2023 versus $1,417-million in fiscal 2022, for an increase of 8 per cent that was due to higher compensation and employee benefits, higher technology expenses related to the segment's initiatives, and $43-million in specified items recorded in fiscal 2023. At 60.8 per cent in fiscal 2023, the segment's efficiency ratio deteriorated, partly due to the fiscal 2023 specified items. As for the segment's adjusted non-interest expenses, they stood at $1,491-million, up 5 per cent from $1,417-million in fiscal 2022. At 59.1 per cent, the segment's 2023 adjusted efficiency ratio improved by 0.6 percentage point from 59.7 per cent in fiscal 2022. Wealth management recorded $2-million in provisions for credit losses in fiscal 2023 compared with $3-million in fiscal 2022.

Financial markets

In the financial markets segment, net income totalled $284-million in the fourth quarter of 2023, up 40 per cent from $203-million in the fourth quarter of 2022. As for adjusted net income, which excludes intangible asset impairment losses, it totalled $289-million, up 42 per cent from $203-million in the fourth quarter of 2022. The segment's fourth quarter total revenues on a taxable equivalent basis amounted to $735-million, up $172-million or 31 per cent from $563-million in the fourth quarter of 2022. Global markets revenues rose 43 per cent year-over-year owing to increases across every revenue category, notably revenues from equities, which posted growth of 54 per cent. Fourth quarter corporate and investment banking revenues grew 16 per cent year-over-year given increases in banking service revenues and revenues from capital markets activity, partly offset by a decrease in revenues from merger and acquisition activity.

For the fourth quarter of 2023, the segment's non-interest expenses stood at $319-million, a 26-per-cent year-over-year increase that was due to higher compensation and employee benefits (notably wage growth and the variable compensation associated with revenue growth), higher technology investment expenses, and expenses related to the segment's business growth. At 43.4 per cent in fourth quarter 2023 versus 45.1 per cent in fourth quarter 2022, the efficiency ratio improved by 1.7 percentage points owing to growth in the segment's revenues. As for adjusted non-interest expenses, they stood at $312-million in fourth quarter 2023 versus $254-million in fourth quarter 2022. And the adjusted efficiency ratio was 42.4 per cent in fourth quarter 2023 versus 45.1 per cent in fourth quarter 2022. The segment recorded $24-million in provisions for credit losses in the fourth quarter of 2023 compared with $32-million in the same quarter last year, for a decrease that stems from lower provisions for credit losses on impaired loans in the fourth quarter of 2023. As for provisions for credit losses on non-impaired loans, they were up slightly year-over-year.

For fiscal 2023, financial markets' net income totalled $1,055-million, down 2 per cent year-over-year. Growth in the segment's total revenues was more than offset by higher non-interest expenses and higher provisions for credit losses. As for adjusted net income, which excludes intangible asset impairment losses, it totalled $1,060-million, down 1 per cent from $1,074-million in fiscal 2022. The segment's income before provisions for credit losses and income taxes stood at $1,495-million in fiscal 2023, up $56-million or 4 per cent from fiscal 2022. Its fiscal 2023 total revenues on a taxable equivalent basis amounted to $2,656-million, a $188-million or 8-per-cent increase from $2,468-million in fiscal 2022. Global markets revenues were down 1 per cent due to an 8-per-cent decrease in revenues from equity securities, whereas revenues from fixed-income securities rose 14 per cent and revenues from commodities and foreign exchange activities rose 11 per cent. As for the fiscal 2023 corporate and investment banking revenues, they grew 20 per cent year-over-year given growth in banking service revenues, higher revenues from capital markets activity, and higher revenues from merger and acquisition activity.

For fiscal 2023, the segment's non-interest expenses rose 13 per cent year-over-year. This increase was due to the same reasons provided above for the fourth quarter. At 43.7 per cent, the fiscal 2023 efficiency ratio deteriorated when compared with 41.7 per cent in fiscal 2022. As for the segment's adjusted non-interest expenses, they stood at $1,154-million in fiscal 2023 versus $1,029-million in fiscal 2022. And as for the adjusted efficiency ratio, it was 43.4 per cent in fiscal 2023 versus 41.7 per cent in fiscal 2022. The segment recorded $39-million in provisions for credit losses during fiscal 2023 compared with $23-million in recoveries of credit losses in fiscal 2022. This increase was mainly due to a $60-million increase in provisions for credit losses on non-impaired loans, as there was loan portfolio growth in fiscal 2023 and the fiscal 2023 macroeconomic conditions were less favourable than those of fiscal 2022. In addition, the fiscal 2023 provisions for credit losses on impaired loans were up slightly year-over-year.

U.S. specialty finance and international (USSF&I)

In the USSF&I segment, net income totalled $145-million in the fourth quarter of 2023 compared with $132-million in the fourth quarter of 2022, a 10-per-cent increase that was essentially driven by the Credigy subsidiary, notably its total revenue growth. For fiscal 2023, the segment's net income totalled $548-million compared with $557-million in fiscal 2022, as growth in total revenues was more than offset by higher non-interest expenses and higher provisions for credit losses.

Credigy

The Credigy subsidiary's net income totalled $61-million in the fourth quarter of 2023, up $15-million or 33 per cent year-over-year. Its fourth quarter total revenues amounted to $126-million compared with $88-million in the same quarter of 2022, an increase that was mainly due to loan volume growth as well as to growth in non-interest income given a higher unfavourable impact of remeasuring certain portfolios at fair value during the fourth quarter of 2022. Its fourth quarter non-interest expenses stood at $38-million, a $6-million year-over-year increase that was mainly due to higher compensation and employee benefits, notably the variable compensation associated with revenue growth in the fourth quarter of 2023. Credigy's provisions for credit losses increased by $12-million compared with the same quarter of 2022, due to an increase in provisions for credit losses on non-impaired loans associated with growth in the loan portfolio and a deterioration in certain risk parameters as well as to impaired loans, with these increases being partly offset by a decrease in provisions for credit losses on POCI loans resulting from favourable remeasurements of certain portfolios during the fourth quarter of 2023.

For fiscal 2023, Credigy's net income totalled $207-million, a 4-per-cent year-over-year decrease that was due to notably higher provisions for credit losses. The subsidiary's income before provisions for credit losses and income taxes totalled $343-million in fiscal 2023, up 11 per cent year-over-year. Its total revenues amounted to $483-million in fiscal 2023, up from $439-million in fiscal 2022. A decrease in net interest income was more than offset by growth in non-interest income, as there was a higher unfavourable impact from fair value remeasurements of certain portfolios during fiscal 2022. For fiscal 2023, Credigy's non-interest expenses rose $9-million year-over-year, mainly due to compensation and employee benefits. Its fiscal 2023 provisions for credit losses rose $46-million year-over-year, mainly due to the same reasons provided above for the fourth quarter.

ABA Bank

For the fourth quarter of 2023, the ABA Bank subsidiary's net income totalled $84-million, down $2-million or 2 per cent from the same quarter in 2022. The subsidiary's fourth quarter total revenues rose 4 per cent, mainly due to sustained loan growth, partly offset by an increase in interest expenses on deposits. Its fourth quarter non-interest expenses stood at $68-million, a $10-million or 17-per-cent year-over-year increase attributable to higher compensation and employee benefits (notably due to wage growth given a greater number of employees) and higher occupancy expenses resulting from the subsidiary's business growth and opening of new branches. Its provisions for credit losses, which stood at $13-million in the fourth quarter of 2023, rose $1-million year-over-year.

For fiscal 2023, ABA Bank's net income totalled $343-million, up $3-million or 1 per cent from fiscal 2022. Growth in the subsidiary's business activities, mainly sustained loan growth, drove total revenues up 9 per cent year-over-year. This increase was, however, partly offset by higher interest rates on deposits and lower interest rates on loans given a competitive environment in Cambodia. The subsidiary's fiscal 2023 non-interest expenses stood at $260-million, a 23-per-cent year-over-year increase that was due to the same reasons provided above for the fourth quarter as well as to higher advertising expenses. Its provisions for credit losses stood at $32-million in fiscal 2023, a $1-million year-over-year increase that stems from higher provisions for credit losses on non-impaired loans, partly offset by lower provisions for credit losses on impaired loans.

Other

For the other heading of segment results, there was a net loss of $104-million in the fourth quarter of 2023 compared with a net loss of $125-million in the fourth quarter of 2022. The change was notably due to lower gains on investments in fiscal 2023, partly offset by a higher contribution from treasury activities. For the fourth quarter of 2023, non-interest expenses were down year-over-year, mainly due to a decrease in variable compensation, partly offset by certain specified items recorded in the fourth quarter of 2023, notably $12-million in impairment losses on premises and equipment and intangible assets and $6-million in charges related to penalties on onerous contracts. The specified items recorded during the fourth quarter of 2023 had an unfavourable impact of $13-million on net loss. As for fourth quarter adjusted net loss, it was $91-million compared with a net loss of $125-million in the same quarter of 2022.

For the year ended Oct. 31, 2023, net loss stood at $264-million compared with a net loss of $196-million in fiscal 2022. The change in net loss was notably due to lower gains on investments in fiscal 2023, partly offset by a higher contribution from treasury activities and a $91-million gain recorded upon the fair value remeasurement of an equity interest during fiscal 2023. For fiscal 2023, non-interest expenses were down slightly year-over-year, mainly due to variable compensation, partly offset by certain specified items recorded in fiscal 2023, notably a $25-million expense related to the retroactive impact of changes to the Excise Tax Act, $12-million in impairment losses on premises and equipment and intangible assets, and $6-million in charges related to penalties on onerous contracts. The fiscal 2023 specified items had a $12-million favourable impact on net loss. As for adjusted net loss, it stood at $276-million in fiscal 2023 compared with a $196-million net loss in fiscal 2022.

Consolidated balance sheet

Assets

As at Oct. 31, 2023, the bank had total assets of $423.6-billion, a $19.9-billion or 5-per-cent increase from $403.7-billion as at Oct. 31, 2022. At $35.2-billion as at Oct. 31, 2023, cash and deposits with financial institutions were up $3.3-billion since Oct. 31, 2022, mainly due to an increase in deposits with the U.S. Federal Reserve, partly offset by a decrease in deposits with the Bank of Canada. The high level of cash and deposits with financial institutions is explained in part by the excess liquidity related to the accommodative monetary policies that have been applied by central banks since 2020.

Securities rose $12.1-billion since Oct. 31, 2022, due to a $12.6-billion or 14-per-cent increase in securities at fair value through profit or loss, an increase that was essentially attributable to equity securities and securities issued or guaranteed by the Canadian government, partly offset by a decrease in securities issued or guaranteed by U.S. treasury, other U.S. agencies and other foreign governments. As for securities other than those measured at fair value through profit or loss, they decreased by $500-million. Securities purchased under reverse repurchase agreements and securities borrowed decreased by $15.2-billion since Oct. 31, 2022, mainly due to the activities of the financial markets segment and treasury.

Totalling $225.4-billion as at Oct. 31, 2023, loans and acceptances, net of allowances for credit losses, rose $18.7-billion or 9 per cent since Oct. 31, 2022.

Since Oct. 31, 2022, residential mortgages (including home equity lines of credit) rose $6.8-billion or 6 per cent due to sustained demand for mortgage credit in the personal and commercial segment, as well as to the activities of the financial markets segment and the ABA Bank and Credigy subsidiaries. Personal loans totalled $16.8-billion at year-end 2023, rising $1-billion from $15.8-billion since Oct. 31, 2022. This increase came mainly from business growth at personal banking and ABA Bank. At $2.6-billion, credit card receivables rose $200-million since Oct. 31, 2022. Loans and acceptances to business and government rose $10.9-billion or 14 per cent compared with Oct. 31, 2022, mainly due to business growth at commercial banking, in corporate banking financial services and at ABA Bank.

Impaired loans include all loans classified in stage 3 of the expected credit loss model and POCI loans. As at Oct. 31, 2023, gross impaired loans stood at $1,584-million compared with $1,271-million as at Oct. 31, 2022. As for net impaired loans, they totalled $1,276-million as at Oct. 31, 2023, compared with $1,030-million as at Oct. 31, 2022. Net impaired loans excluding POCI loans amounted to $606-million, rising $127-million from $479-million as at Oct. 31, 2022. This increase was essentially due to an increase in the net impaired loans of the loan portfolios of the personal and commercial segment 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 $670-million as at Oct. 31, 2023, compared with $551-million as at Oct. 31, 2022, an increase due to portfolio acquisitions conducted by Credigy and commercial banking during fiscal 2023.

As at Oct. 31, 2023, other assets totalled $29.8-billion compared with $28.9-billion as at Oct. 31, 2022, a $900-million increase that was mainly due to a $1.9-billion increase in other assets, notably receivables, prepaid expenses and other items; interest and dividends receivable; and current tax assets, with these increases being partly offset by a decrease in amounts due from clients, dealers and brokers. Furthermore, derivative financial instruments were down $1-billion, with this result being related to the activities of the financial markets segment.

Liabilities

As at Oct. 31, 2023, the bank had total liabilities of $399.9-billion compared with $382-billion as at Oct. 31, 2022.

The bank's total deposit liability stood at $288.2-billion as at Oct. 31, 2023, rising $21.8-billion or 8 per cent from $266.4-billion as at Oct. 31, 2022. At $87.9-billion as at Oct. 31, 2023, personal deposits increased $9.1-billion since Oct. 31, 2022. This increase was driven by business growth at personal banking, in both the wealth management and financial markets segments, and at ABA Bank.

Business and government deposits totalled $197.3-billion as at Oct. 31, 2023, rising $13.1-billion since Oct. 31, 2022. This increase came from the financing activities of the financial markets segment and of treasury, including $4.9-billion in deposits subject to bank recapitalization (bail-in) conversion regulations, as well as from commercial banking activities. Deposits from deposit-taking institutions totalled $3-billion as at Oct. 31, 2023, declining $400-million since the end of fiscal 2022.

Other liabilities, totalling $111-billion as at Oct. 31, 2023, decreased $3.1-billion since Oct. 31, 2022, resulting essentially from an $8.1-billion decrease in obligations related to securities sold short and a $1.3-billion decrease in liabilities related to transferred receivables. These decreases were partly offset by a $4.8-billion increase in obligations related to securities sold under repurchase agreements and securities loaned and a $1.1-billion increase in other liabilities, notably interest and dividends payable.

Subordinated debt decreased since Oct. 31, 2022, as a result of the bank's redemption, on Feb. 1, 2023, of $750-million in medium-term notes.

Equity

As at Oct. 31, 2023, equity attributable to the bank's shareholders and holders of other equity instruments totalled $23.7-billion, rising $2-billion from $21.7-billion since Oct. 31, 2022. This increase was due to net income net of dividends; the issuances of common shares under the stock option plan; and accumulated other comprehensive income, notably net unrealized foreign currency translation gains on investments in foreign operations and net gains on instruments designated as cash flow hedges. These increases were partly offset by remeasurements of pension plans and other postemployment benefit plans as well as by the net fair value change attributable to the credit risk on financial liabilities designated at fair value through profit or loss.

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 to 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 Oct. 31, 2023.

Canadian government's 2022 tax measures

On Nov. 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 Nov. 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 include the Canada recovery dividend (CRD), which is a one-time, 15-per-cent tax on the fiscal 2021 and 2020 average taxable income above $1-billion, as well as a 1.5-per-cent increase in the statutory tax rate. On Dec. 15, 2022, Bill C-32 received royal assent. Given that these tax measures were in effect at the financial reporting date, 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 year ended Oct. 31, 2023.

Proposed legislation

On Nov. 28, 2023, the government of Canada released draft legislation entitled An Act to implement certain provisions of the fall economic statement tabled in Parliament on Nov. 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-per-cent tax on the net value of equity repurchases occurring as of Jan. 1, 2024.

In its March 28, 2023, budget, the government of Canada also proposed to implement the Pillar 2 rules (global minimum tax) published by the Organisation for Economic Co-operation and Development (OECD) for fiscal years beginning as of Dec. 31, 2023. To date, the Pillar 2 rules have not yet been included in a bill in Canada. During fiscal 2023, the Pillar 2 rules were included in a bill in certain jurisdictions where the bank operates.

The federal budget of March 28, 2023, also included another tax measure on amendments to the Excise Tax Act, indicating that payment card clearing services rendered by a payment card network operator are subject to the goods and services tax (GST) and the harmonized sales tax (HST). On April 20, 2023, the government of Canada tabled Bill C-47 -- An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023, to implement, among other things, these amendments to the GST/HST for payment cards. On June 22, 2023, Bill C-47 received royal assent. Given that the amendment to the Excise Tax Act had been adopted at the reporting date, an expense of $25-million was recognized in the consolidated financial statements for the year ended Oct. 31, 2023.

Event after the consolidated balance sheet date

Repurchase of common shares

On Nov. 30, 2023, the bank's board of directors approved a normal course issuer bid, beginning Dec. 12, 2023, to repurchase for cancellation up to seven million common shares (representing approximately 2.07 per cent of its then outstanding common shares) over the 12-month period ending Dec. 11, 2024. Any repurchase through the Toronto Stock Exchange will be done at market prices. The common shares may also be repurchased through other means authorized by the Toronto Stock Exchange and applicable regulations, including private agreements or share repurchase programs under issuer bid exemption orders issued by the securities regulators. A private purchase made under an exemption order issued by a securities regulator will be done at a discount to the prevailing market price. The amounts that are paid above the average book value of the common shares are charged to retained earnings. This normal course issuer bid is subject to the approval of OSFI (the Office of the Superintendent of Financial Institutions) and the Toronto Stock Exchange (TSX).

Capital management

As at Oct. 31, 2023, the bank's common equity Tier 1, Tier 1 and total capital ratios were, respectively, 13.5 per cent, 16 per cent and 16.8 per cent, compared with ratios of, respectively, 12.7 per cent, 15.4 per cent and 16.9 per cent as at Oct. 31, 2022. The CET1 and Tier 1 capital ratios increased since Oct. 31, 2022, essentially due to the contribution from net income net of dividends, to common share issuances under the stock option plan, and to the positive impact from the implementation of the Basel III reforms related to the credit and operational risk frameworks. These factors were partly offset by growth in RWA and by the end of the transitional measures applicable to expected credit loss provisioning implemented by OSFI at the beginning of the COVID-19 pandemic. The total capital ratio increased due to the same factors mentioned above, but the increase was more than offset by the $750-million redemption of medium-term notes on Feb. 1, 2023.

As at Oct. 31, 2023, the leverage ratio was 4.4 per cent compared with 4.5 per cent as at Oct. 31, 2022. The decrease in the leverage ratio was essentially due to the growth in total exposure and to the end of the temporary measure permitted by OSFI with respect to the exclusion of central bank reserves from the leverage exposure calculation. These factors were partly offset by the growth in Tier 1 capital.

As at Oct. 31, 2023, the bank's TLAC ratio and TLAC leverage ratio were, respectively, 29.2 per cent and 8 per cent, compared with 27.7 per cent and 8.1 per cent, respectively, as at Oct. 31, 2022. The increase in the TLAC ratio was due to the same factors described for the total capital ratio as well as to the net instrument issuances 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 year ended Oct. 31, 2023, the bank was in compliance with all of OSFI's regulatory capital, leverage and TLAC requirements.

Dividends

On Nov. 30, 2023, the board of directors declared regular dividends on the various series of first preferred shares and a dividend of $1.06 per common share, up four cents or 4 per cent, payable on Feb. 1, 2024, to shareholders of record on Dec. 25, 2023.

Information for shareholders and investors

Disclosure of fourth quarter 2023 results

Conference call

A conference call for analysts and institutional investors will be held on Friday, Dec. 1, 2023, at 11 a.m. ET.

Access by telephone in listen-only mode: 1-800-806-5484 or 416-340-2217. The access code is 3705216 followed by the pound key.

A recording of the conference call can be heard until March 1, 2024, by dialling 1-800-408-3053 or 905-694-9451. The access code is 4238787 followed by the pound key.

Webcast

The conference call will be webcast live on National Bank's website.

A recording of the webcast will also be available on National Bank's website after the call.

Financial documents

The press release (which includes the quarterly consolidated financial statements) is available at all times on National Bank's website.

The press release, the supplementary financial information, the supplementary regulatory capital and Pillar 3 disclosure, and a slide presentation will be available on the investor relations page of National Bank's website on the morning of the day of the conference call.

The 2023 annual report (which includes the audited annual consolidated financial statements and management's discussion and analysis) will also be available on National Bank's website.

The report to shareholders for the first quarter ended Jan. 31, 2024, will be available on Feb. 28, 2024 (subject to approval by the bank's board of directors).

We seek Safe Harbor.