Scotiabank reports fourth quarter and 2016 results
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E-mailTORONTO, ONTARIO -- (Marketwired) -- 11/29/16 --
---------------------------------------------------------------------------- Scotiabank's 2016 audited annual consolidated financial statements and accompanying Management's Discussion & Analysis (MD&A) are available at www.scotiabank.com along with the supplementary financial information and regulatory capital disclosure reports, which includes fourth quarter financial information. All amounts are in Canadian dollars and are based on our audited annual consolidated financial statements and accompanying MD&A for the year ended October 31, 2016 and related note prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise noted. Additional information related to the Bank, including the Bank's Annual Information Form, can be found on the SEDAR website at www.sedar.com and on the EDGAR section of the SEC's website at www.sec.gov. ----------------------------------------------------------------------------
Fiscal 2016 Highlights on a reported basis (versus Fiscal 2015)
-- Net income of $7,368 million, compared to $7,213 million -- Diluted earnings per share of $5.77 compared to $5.67 -- Return on equity (ROE) of 13.8%, compared to 14.6% -- Annual dividends per share of $2.88 compared to $2.72, an increase of 6%
Fiscal 2016 Highlights adjusted for the Q2/16 restructuring charge(1) (versus Fiscal 2015)
-- Net income of $7,646 million, compared to $7,213 million, up 6% -- Diluted earnings per share of $6.00 compared to $5.67, up 6% -- ROE of 14.3%, compared to 14.6%
Fourth Quarter Highlights on a reported basis (versus Q4, 2015)
-- Net income of $2,011 million, compared to $1,843 million, up 9% -- Diluted earnings per share of $1.57 compared to $1.45, up 8% -- ROE of 14.7%, compared to 14.2%
Fiscal 2016 performance versus medium-term objectives:
The Bank's performance with respect to its medium-term financial and operational objectives was as follows (2016 performance adjusting for the impact of the Q2, 2016 restructuring charge(1), is reflected in parantheses):
1. Earn an ROE of 14%+. For the full year, Scotiabank earned an ROE of
13.8% (14.3%).
2. Generate growth in EPS (Diluted) of 5% to 10%. The year-over-year EPS
growth was up 2% (6%).
3. Maintain positive operating leverage. Scotiabank's performance was
negative 1.9% (positive 1.0%).
4. Maintain strong capital ratios. Scotiabank's capital position remains
strong with a Common Equity Tier 1 ratio of 11.0%.
(1) Refer to "Non-GAAP Measures" section.
Scotiabank reported net income of $7,368 million in 2016, compared with net income of $7,213 million in 2015. Diluted earnings per share (EPS) were $5.77, a 2% increase from last year. Adjusting for the second quarter restructuring charge of $278 million after tax ($378 million pre-tax), net income increased to $7,646 million and EPS rose to $6.00, a 6% increase compared to last year.
Scotiabank reported net income for the fourth quarter ended October 31, 2016 of $2,011 million, compared to $1,843 million for the same period last year. EPS was $1.57, up 8% compared to $1.45 last year. Return on equity was 14.7%. A quarterly dividend of 74 cents per common share was announced.
"During 2016, continued strong performances in our personal, commercial and wealth businesses, both in Canada and in our key Pacific Alliance markets drove solid earnings growth" said Brian Porter, President and CEO. "Our good results were achieved alongside a focused effort to advance the Bank's strategic agenda including investments in digital capabilities to drive an even greater customer experience and more efficient operations.
"Canadian Banking had another strong year of operating performance and earnings growth. We continue to deliver valued advice, services and products to our base of more than 10 million retail and commercial customers. By deepening existing relationships and adding new customers, we further improved our asset and deposit mix, while generating improved returns for shareholders.
"International Banking delivered strong results, with annual earnings exceeding $2 billion for the first time. Our strong results were driven by the key Pacific Alliance region which again recorded double digit deposit and asset growth complemented by our improved performance from the Caribbean and Central America. And while economic growth moderated somewhat in select markets, we continue to strengthen and drive deeper customer relationships to gain profitable market share and grow earnings.
"Global Banking and Markets had a much improved second half of the year, closing the year with $461 million of earnings in Q4, the result of better performance in fixed income and corporate banking.
"With two dividend increases in 2016, we increased our returns to shareholders by 6% this year. Our capital position is very strong at 11.0%, and will support investments required to execute our strategic agenda including improving our customers' experience and increasing efficiency.
"In 2016, we made very good progress against our strategic agenda, which is delivering strong financial performance, while positioning the Bank for success over the longer term. Looking forward, we will build on our momentum as we continue to build an even better Bank for our shareholders, our customers and our employees."
Non-GAAP Measures
The Bank uses a number of financial measures to assess its performance. Some of these measures are not calculated in accordance with Generally Accepted Accounting Principles (GAAP), which are based on International Financial Reporting Standards (IFRS), are not defined by GAAP and do not have standardized meanings that would ensure consistency and comparability among companies using these measures. The Bank believes that certain non-GAAP measures are useful in assessing underlying ongoing business performance and provide readers with a better understanding of how management assesses performance. These non-GAAP measures are used throughout this press release and are defined in the "Non-GAAP Measures" section of the Bank's 2016 Annual Report.
Impact of the 2016 restructuring charge:
The table below reflects the impact of the 2016 restructuring charge of $378 million pre-tax ($278 million after tax)(1)
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Adjusting for
Impact of the the
For the year ended October restructuring restructuring
31, 2016 ($ millions) Reported charge charge
----------------------------------------------------------------------------
Net income ($ millions) $ 7,368 $ 278 $ 7,646
Diluted earnings per share $ 5.77 $ 0.23 $ 6.00
Return on equity 13.8 0.5% 14.3%
Productivity ratio 55.2% (1.5)% 53.7%
Operating leverage (1.9)% 2.9% 1.0%
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(1) Calculated using the statutory tax rates of the various jurisdictions.
Adjusted diluted earnings per share
The adjusted diluted earnings per share is calculated as follows:
As at and for the three months ended
---------------------------------------------------------------
October 31 July 31 October 31
(Unaudited) 2016 2016 2015
---------------------------------------------------------------
Net income attributable
to common shareholders
(diluted) $ 1,925 $ 1,879 $ 1,775
Restructuring charge - - -
---------------------------------------
Net income attributable
to common shareholders
(diluted) adjusted for
restructuring charge 1,925 1,879 1,775
Amortization of
intangible assets,
excluding software 18 18 18
---------------------------------------
Adjusted net income
attributable to common
shareholders (diluted) $ 1,943 $ 1,897 $ 1,793
Weighted average number
of diluted common
shares outstanding
(millions) 1,226 1,222 1,227
---------------------------------------------------------------
Adjusted diluted
earnings per share(1)
(in dollars) $ 1.58 $ 1.55 $ 1.46
---------------------------------------------------------------
For the year ended
----------------------------------------------------------------------------
October 31 Diluted October 31 Diluted
(Unaudited) 2016 EPS 2015 EPS
----------------------------------------------------------------------------
Net income attributable
to common shareholders
(diluted) $ 7,070 $ 5.77 $ 6,983 $ 5.67
Restructuring charge 278 0.23 - -
----------------------------------------------------
Net income attributable
to common shareholders
(diluted) adjusted for
restructuring charge 7,348 6.00 6,983 5.67
Amortization of
intangible assets,
excluding software 76 0.05 65 0.05
----------------------------------------------------
Adjusted net income
attributable to common
shareholders (diluted) $ 7,424 $ 6.05 $ 7,048 $ 5.72
Weighted average number
of diluted common
shares outstanding
(millions) 1,226 1,232
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Adjusted diluted
earnings per share(1)
(in dollars) $ 6.05 $ 5.72
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(1) Adjusted diluted earnings per share calculations are based on full
dollar and share amounts.
Core banking assets
Core banking assets are average assets excluding bankers' acceptances and average trading assets within Global Banking and Markets.
Core banking margin
This ratio represents net interest income divided by average core banking assets.
Financial Highlights
As at and for the three months
ended For the year ended
----------------------------------------------------------------------------
October 31 July 31 October 31 October 31 October 31
(Unaudited) 2016 2016 2015 2016 2015
----------------------------------------------------------------------------
Operating results ($
millions)
Net interest income 3,653 3,602 3,371 14,292 13,092
Non-interest income 3,098 3,038 2,754 12,058 10,957
Total revenue 6,751 6,640 6,125 26,350 24,049
Provision for credit
losses 550 571 551 2,412 1,942
Non-interest expenses 3,650 3,505 3,286 14,540 13,041
Income tax expense 540 605 445 2,030 1,853
Net income 2,011 1,959 1,843 7,368 7,213
Net income
attributable to
common shareholders 1,908 1,860 1,754 6,987 6,897
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Operating performance
Basic earnings per
share ($) 1.58 1.55 1.46 5.80 5.70
Diluted earnings per
share ($) 1.57 1.54 1.45 5.77 5.67
Adjusted diluted
earnings per share
($)(1) 1.58 1.55 1.46 6.05 5.72
Return on equity (%) 14.7 14.8 14.2 13.8 14.6
Productivity ratio
(%)(2) 54.1 52.8 53.6 55.2 54.2
Core banking margin
(%)(1)(2) 2.40 2.38 2.35 2.38 2.39
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Financial position
information($
millions)
Cash and deposits
with financial
institutions 46,344 69,774 73,927
Trading assets 108,561 103,861 99,140
Loans 480,164 472,800 458,628
Total assets 896,266 906,844 856,497
Deposits 611,877 631,344 600,919
Common equity 52,657 50,761 49,085
Preferred shares 3,594 3,094 2,934
Assets under
administration 472,817 464,930 453,926
Assets under
management 192,702 187,864 179,007
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Capital and liquidity
measures
Common Equity Tier 1
(CET1) capital ratio
(%) 11.0 10.5 10.3
Tier 1 capital ratio
(%) 12.4 11.8 11.5
Total capital ratio
(%) 14.6 14.1 13.4
Leverage ratio (%) 4.5 4.2 4.2
CET1 risk-weighted
assets ($
millions)(3) 364,048 357,657 357,995
Liquidity coverage
ratio (LCR) (%) 127 125 124
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Credit quality
Net impaired loans ($
millions)(4) 2,446 2,491 2,085
Allowance for credit
losses ($ millions) 4,626 4,542 4,197
Net impaired loans as
a % of loans and
acceptances(4) 0.49 0.51 0.44
Provision for credit
losses as a % of
average net loans
and acceptances 0.45 0.47 0.47 0.50 0.43
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Common share
information
Closing share price
($) (TSX) 72.08 66.33 61.49
Shares outstanding
(millions)
Average - Basic 1,206 1,203 1,205 1,204 1,210
Average - Diluted 1,226 1,222 1,227 1,226 1,232
End of period 1,208 1,205 1,203
Dividends per share
($) 0.74 0.72 0.70 2.88 2.72
Dividend yield (%)(5) 4.3 4.5 4.8 4.7 4.4
Market capitalization
($ millions) (TSX) 87,065 79,906 73,969
Book value per common
share ($) 43.59 42.14 40.80
Market value to book
value multiple 1.7 1.6 1.5
Price to earnings
multiple (trailing 4
quarters) 12.4 11.7 10.8
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Other information
Employees 88,901 88,783 89,214
Branches and offices 3,113 3,126 3,177
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(1) Refer to Non-GAAP measures section of this press release for a
discussion of these measures.
(2) During the year, the taxable equivalent adjustment was no longer
included in the calculation. Prior period amounts have been restated.
(3) As at October 31, 2016, credit valuation adjustment (CVA) risk-weighted
assets were calculated using scalars of 0.64, 0.71 and 0.77 to compute
CET1, Tier 1 and Total capital ratios, respectively.
(4) Excludes loans acquired under the Federal Deposit Insurance Corporation
(FDIC) guarantee related to the acquisition of R-G Premier Bank of
Puerto Rico.
(5) Based on the average of the high and low common share price for the
period.
Group Financial Performance
Q4 2016 vs. Q4 2015
Net income
Net income was $2,011 million, an increase of $168 million or 9%. Strong asset growth and higher capital markets revenues were partly offset by higher non-interest expenses and income taxes.
Net interest income
Net interest income was $3,653 million, an increase of $282 million or 8%. The increase was attributable primarily to growth in retail and commercial loans in International Banking, credit cards, automotive loans and residential mortgages in Canadian Banking, and corporate loans in Global Banking and Markets.
The core banking margin was 2.40%, up five basis points driven by higher margins across all business lines, partially offset by lower contribution from asset/liability management activities in the Other segment.
Non-interest income
Non-interest income of $3,098 million was up $344 million or 12%. This was driven by higher banking fees, wealth management and trading revenues, underwriting and other advisory fees and net income from investments in associated corporations. Gains on sale of real estate were largely offset by lower net gains on investment securities.
Provision for credit losses
The provision for credit losses was $550 million, down $1 million. Last year's increase in collective allowance against performing loans of $60 million was mostly offset by higher provisions in Canadian Banking and International Banking.
Non-interest expenses
Non-interest expenses increased by $364 million or 11% to $3,650 million. Last year benefited from lower pension benefit costs, partly offset by the reorganization costs relating to Canadian shared services. The increase was primarily due to higher performance and stock-based compensation, acquisitions and continued investments in the business, including technology and professional expenses. This was partly offset by the favourable impact of foreign currency translation and savings from structural cost reduction initiatives.
The productivity ratio was 54.1%, compared to 53.6%.
Income taxes
The tax rate was 21.2% compared to 19.4%, due primarily to lower tax-exempt income.
Q4 2016 vs. Q3 2016
Net income
Net income was $2,011 million, an increase of $52 million or 3%. Higher revenues, lower provision for credit losses and lower income taxes, were partly offset by higher non-interest expenses.
Net interest income
Net interest income was $3,653 million, an increase of $51 million or 1%. The increase was attributable to asset growth primarily in residential mortgages and automotive loans in Canadian Banking, and retail loans in International Banking.
The core-banking margin was 2.40%, up two basis points, mostly from higher margins in Canadian Banking and Global Banking and Markets.
Non-interest income
Non-interest income was $3,098 million, up $60 million or 2%. Higher banking and wealth management revenues and contributions from associated corporations were partly offset by lower underwriting and advisory fees. Gains on sale of real estate were offset by lower net gains on investment securities.
Provision for credit losses
The provision for credit losses was $550 million, a decline from $571 million, due primarily to lower provisions in International Banking.
Non-interest expenses
Non-interest expenses were up $145 million or 4%. This was mainly due to continued investments in the business, including technology and professional fees, and higher seasonal marketing expenses.
The productivity ratio was 54.1% compared to 52.8%.
Income taxes
The effective tax rate was 21.2% compared to 23.6% due primarily to higher taxes in certain foreign jurisdictions in the previous quarter.
Common Dividend
The Board of Directors at its meeting approved the quarterly dividend of 74 cents per common share. This quarterly dividend applies to shareholders of record as of January 3, 2017 and is payable January 27, 2017.
Capital Ratios
The Bank continues to maintain strong, high quality capital levels which position it well for future business growth. The Basel III all-in Common Equity Tier 1 (CET1) ratio as at October 31, 2016 was 11.0%. Increases in the CET1 ratio from 2015 were primarily from strong internal capital generation and the prudent management of asset growth during the year.
The Bank's Basel III all-in Tier 1 and Total capital ratios were 12.4% and 14.6%, respectively, as at October 31, 2016. Tier 1 and Total Capital also benefited from capital issuances during the year.
The Bank's capital ratios continue to be well in excess of OSFI's minimum capital ratio requirements for 2016 (including the 1% D-SIB surcharge) of 8%, 9.5% and 11.5% for CET1, Tier 1 and Total Capital, respectively.
Business Segment Review
Canadian Banking
For the three months ended For the year ended
----------------------------------------------------------------------------
(Unaudited) ($
millions)
(Taxable
equivalent October 31 July 31 October 31 October 31 October 31
basis)(1) 2016 2016 2015 2016 2015
----------------------------------------------------------------------------
Business segment
income
Net interest
income $ 1,798 $ 1,770 $ 1,657 $ 7,024 $ 6,415
Non-interest
income(2) 1,314 1,273 1,215 5,164 4,832
------------------------------------------------------------
Total revenue 3,112 3,043 2,872 12,188 11,247
Provision for
credit losses 217 217 180 832 687
Non-interest
expenses 1,612 1,567 1,553 6,324 6,014
Income tax
expense 329 329 302 1,296 1,202
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Net income $ 954 $ 930 $ 837 $ 3,736 $ 3,344
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Net income
attributable to
non-controlling
interest in
subsidiaries $ - $ - $ - $ - $ -
Net income
attributable to
equity holders
of the Bank $ 954 $ 930 $ 837 $ 3,736 $ 3,344
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Other measures
Return on equity 22.4% 21.9% 20.2% 22.0% 21.0%
Assets under
administration
($ billions) $ 318 $ 316 $ 310 $ 318 $ 310
Assets under
management ($
billions) $ 145 $ 145 $ 135 $ 145 $ 135
Average assets
($ billions) $ 313 $ 310 $ 304 $ 309 $ 300
Average
liabilities ($
billions) $ 237 $ 233 $ 224 $ 232 $ 218
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(1) Results are presented on a taxable equivalent basis. Refer to Business
Line Overview section of the Bank's 2016 Annual Report.
(2) Includes net income from investments in associated corporations for the
three months ended October 31, 2016 - $25 (July 31, 2016 - $20; October
31, 2015 - $15) and for the year ended October 31, 2016 - $78 (October
31, 2015 - $66).
Q4 2016 vs. Q4 2015
Net income
Net income attributable to equity holders was $954 million, an increase of $117 million or 14%. An increase in the net interest margin, solid growth from assets and deposits, impact of the credit card portfolio acquired from JPMorgan Chase Bank ("the acquisition"), and higher non-interest income contributed to this growth. These increases were partially offset by higher non-interest expenses and provision for credit losses.
Average assets
Average assets grew $9 billion or 3% to $313 billion. Adjusting for the impact of the Tangerine broker-originated and white label mortgage run-off portfolios, assets increased $13 billion or 4%. The growth included $5 billion or 7% in personal loans primarily in consumer auto lending and credit cards, $5 billion or 3% in residential mortgages, and $3 billion or 7% in business loans and acceptances.
Average liabilities
Average liabilities increased $13 billion or 6%, including strong growth of $7 billion or 11% in retail banking savings deposits and $1 billion or 8% in chequing accounts. As well, there was growth of $2 billion or 4% in small business and commercial banking business operating accounts and $3 billion or 20% in wealth management deposits. This was partially offset by a decline in low margin GICs of $1 billion or 2%.
Assets under administration (AUA) and assets under management (AUM)
AUM increased $10 billion or 7% driven by net sales and market appreciation. AUA increased $8 billion or 3% driven by market appreciation.
Net interest income
Net interest income of $1,798 million was up $141 million or 9%. This was driven by a 13 basis point increase in the net interest margin to 2.39% and solid growth in assets and deposits. The margin increase was primarily driven by growth in higher yielding credit cards, margin expansion in deposits, the run-off of lower spread Tangerine mortgages, and impact of the acquisition.
Non-interest income
Non-interest income of $1,314 million increased $99 million or 8% due primarily to growth in card revenues, mutual fund fees and gains on sale of real estate. These increases were partly offset by lower transaction based brokerage revenues.
Provision for credit losses
The provision for credit losses was $217 million, an increase of $37 million or 21%. The increase was due to higher provisions in retail portfolios driven by growth in relatively higher spread products. The provision for credit losses ratio increased four basis points to 28 basis points.
Non-interest expenses
Non-interest expenses were $1,612 million, an increase of $59 million or 4%. Half of the increase was from the impact of the acquisition, with the balance primarily reflecting higher spending on technology, projects, and strategic investments, partially offset by benefits realized from cost reduction initiatives.
Taxes
The effective tax rate was 25.6% compared to 26.5% primarily due to the tax effect on the gains on sale of real estate.
Q4 2016 vs. Q3 2016
Net income
Net income attributable to equity holders increased $24 million or 3%, mainly due to the growth in both assets and deposits and higher non-interest income, partly offset by higher non-interest expenses.
Average assets
Average assets rose $3 billion or 1%. Adjusting for the impact of the Tangerine broker-originated and white label mortgage run-off portfolios, assets increased $4 billion or 1% due mainly to the growth of $3 billion or 2% in residential mortgages and $1 billion or 1% in personal loans primarily in consumer auto lending.
Average liabilities
Average liabilities increased $4 billion or 2%, primarily driven by strong growth of $3 billion or 4% in retail banking savings accounts and $2 billion or 4% in small business and commercial banking business operating accounts. Partially offsetting was a decline of $1 billion or 2% in low margin GICs.
Assets under administration (AUA) and assets under management (AUM)
AUM increased $1 billion or 1% driven by higher net sales. AUA remained unchanged.
Net interest income
Net interest income increased $28 million or 2% due mainly to the growth in both assets and deposits and a slight increase in net interest margin.
Non-interest income
Non-interest income increased $41 million or 3% due primarily to higher card revenues, commercial banking credit, mutual fund, and brokerage fees and gains on sale of real estate.
Provision for credit losses
The provision for credit losses was $217 million unchanged from the prior quarter. An increase in retail portfolios due to growth in relatively higher spread products was offset by a decrease in the commercial portfolio. The provision for credit losses ratio was down one basis point to 28 basis points.
Non-interest expenses
Non-interest expenses were up $45 million or 3%, primarily related to technology and project spending and advertising to support business growth, partially offset by benefits realized from cost reduction initiatives.
Taxes
The effective tax rate was marginally lower at 25.6% compared to 26.1%.
International Banking
For the three months ended For the year ended
----------------------------------------------------------------------------
(Unaudited) ($
millions)
(Taxable
equivalent October 31 July 31 October 31 October 31 October 31
basis)(1) 2016 2016 2015 2016 2015
----------------------------------------------------------------------------
Business segment
income
Net interest
income $ 1,615 $ 1,596 $ 1,510 $ 6,359 $ 5,706
Non-interest
income(2) 883 828 847 3,482 3,137
------------------------------------------------------------
Total revenue 2,498 2,424 2,357 9,841 8,843
Provision for
credit losses 294 316 284 1,281 1,128
Non-interest
expenses 1,413 1,345 1,373 5,523 5,095
Income tax
expense 172 174 136 707 568
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Net income $ 619 $ 589 $ 564 $ 2,330 $ 2,052
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Net income
attributable to
non-controlling
interest in
subsidiaries $ 72 $ 62 $ 60 $ 251 $ 199
Net income
attributable to
equity holders
of the Bank $ 547 $ 527 $ 504 $ 2,079 $ 1,853
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Other measures
Return on equity 13.5% 12.8% 13.1% 12.8% 13.0%
Average assets
($ billions) $ 142 $ 140 $ 135 $ 143 $ 128
Average
liabilities ($
billions) $ 109 $ 108 $ 99 $ 109 $ 94
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(1) Results are presented on a taxable equivalent basis. Refer to Business
Line Overview section of the Bank's 2016 Annual Report.
(2) Includes net income from investments in associated corporations for the
three months ended October 31, 2016 - $130 (July 31, 2016 - $110;
October 31, 2015 - $112) and for the year ended October 31, 2016 - $473
(October 31, 2015 - $476)
Q4 2016 vs. Q4 2015
Net income
International Banking reported net income attributable to equity holders of $547 million, up $43 million or 9% reflecting solid revenues from strong loan, deposit and fee growth in Latin America, a higher contribution from affiliates, acquisitions and good expense control, partly offset by the negative impact of foreign currency translation.
Average assets
Average assets of $142 billion increased $7 billion or 5% driven by strong 8% retail and 2% commercial loan growth, particularly in Latin America.
Average liabilities
Average liabilities increased $10 billion or 10% to $109 billion largely due to 14% growth in deposits, with demand and savings deposits up 8%, partly offset by lower securities purchased under resale agreements.
Net interest income
Net interest income was $105 million higher, driven by solid volume growth and a higher net interest margin. Retail and commercial loan growth was 8% and 2%, respectively, or 11% and 4% adjusting for foreign exchange translation. Growth in retail loans was driven by a 13% increase in Latin America and a 7% increase in the Caribbean & Central America, with acquisitions contributing 2% of total retail loan growth. Commercial loan growth reflected an increase of 6% in Latin America. The net interest margin increased seven basis points to 4.77% driven by widening margins in Latin America.
Non-interest income
Non-interest income increased $36 million or 4% to $883 million due to higher fees and commissions and higher net income from investments in associated corporations. These were partly offset by lower trading revenues and the negative impact of foreign currency translation. Net fee and commission revenues increased $55 million or 9% to $671 million driven primarily by higher transaction fees and card revenues in Latin America and the Caribbean, and acquisitions. Net income from investments in associated corporations increased by $18 million reflecting higher contributions from Thanachart Bank and Bank of Xi'an.
Provision for credit losses
The provision for credit losses was $294 million, up $10 million or 3%. The provision for credit losses ratio improved two basis points to 1.15%, primarily due to stable retail provisions. Higher provisions were entirely driven by an increase in the commercial portfolio.
Non-interest expenses
Non-interest expenses increased by $40 million or 3% driven by acquisitions and inflationary increases partly offset by the positive impact of foreign currency translation and the benefits of expense management programs.
Taxes
The effective tax rate increased to 21.7% compared to 19.4% due to lower tax benefits in Mexico partially offset by higher tax benefits in Peru.
Q4 2016 vs. Q3 2016
Net income
Net income attributable to equity holders increased by $20 million or 4% to $547 million driven by strong retail loan growth, higher fees, higher contributions from associated corporations and lower provisions for credit losses, partly offset by seasonally higher expenses.
Average assets
Average assets of $142 billion increased $2 billion or 2% driven primarily by strong retail loan growth, particularly in credit cards, residential mortgages and personal loans in Latin America. While commercial loan growth in Mexico and Peru were both up a very strong 4% adjusting for the impact of foreign currency translation, there were declines in the Caribbean and other Latin American countries, resulting in commercial loans being down 1%.
Average liabilities
Average liabilities increased $1 billion to $109 billion, largely due to 4% growth in deposits, with demand and savings deposits up 2% and term deposits up 7%.
Net interest income
Net interest income increased $19 million or 1% to $1,615 million driven by solid asset growth, partly offset by a slightly lower margin. Retail loan growth was 4% driven by strong growth in Latin America. The net interest margin declined two basis points to 4.77% with margin declines in the Caribbean & Central America mostly offset by wider margins in Latin America.
Non-interest income
Non-interest income increased $55 million or 7% to $883 million with higher fee and commission revenues and a higher contribution from investments in associated corporations. Net fee and commission revenues increased $41 million or 6% to $671 million primarily driven by seasonally higher fees in Latin America, particularly Chile and Mexico. Net income from investments in associated corporations was 19% higher, primarily due to a higher contribution from Thanachart Bank. Other non-interest income decreased by $6 million or 8% to $82 million, due partly to lower foreign currency trading revenues in Latin America.
Provision for credit losses
The provision for credit losses was $294 million, a decrease of $22 million or 7%, driven mainly by lower commercial provisions in the Caribbean and Central America, from the elevated levels last quarter. The provision for credit losses ratio improved from 11 basis points to 1.15%.
Non-interest expenses
Non-interest expenses of $1,413 million were $68 million or 5% higher, driven largely by higher technology spending, business volume growth and seasonal marketing campaigns in Latin America.
Taxes
The effective tax rate decreased to 21.7% compared to 22.7% due to higher tax benefits in Peru and Colombia.
Global Banking and Markets
For the three months ended For the year ended
----------------------------------------------------------------------------
(Unaudited) ($
millions)
(Taxable
equivalent October 31 July 31 October 31 October 31 October 31
basis)(1) 2016 2016 2015 2016 2015
----------------------------------------------------------------------------
Business segment
income
Net interest
income $ 345 $ 337 $ 273 $ 1,293 $ 1,071
Non-interest
income 830 814 656 3,139 2,953
------------------------------------------------------------
Total revenue 1,175 1,151 929 4,432 4,024
Provision for
credit losses 39 38 27 249 67
Non-interest
expenses 533 507 450 2,040 1,846
Income tax
expense 142 185 127 572 558
----------------------------------------------------------------------------
Net income $ 461 $ 421 $ 325 $ 1,571 $ 1,553
----------------------------------------------------------------------------
Net income
attributable to
non-controlling
interest in
subsidiaries $ - $ - $ - $ - $ -
Net income
attributable to
equity holders
of the Bank $ 461 $ 421 $ 325 $ 1,571 $ 1,553
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Other measures
Return on equity 15.5% 13.7% 10.5% 12.6% 13.0%
Average assets
($ billions) $ 351 $ 341 $ 341 $ 351 $ 342
Average
liabilities ($
billions) $ 273 $ 264 $ 242 $ 270 $ 240
----------------------------------------------------------------------------
(1) Results are presented on a taxable equivalent basis. Refer to Business
Line Overview section of the Bank's 2016 Annual Report.
Q4 2016 vs. Q4 2015
Net income
Net income attributable to equity holders was $461 million, an increase of $136 million or 42%, driven mainly by higher contributions from fixed income, corporate banking, and precious metals as well as the positive impact of foreign currency translation. This was partly offset by higher provision for credit losses.
Average assets
Average assets were $351 billion, an increase of $10 billion or 3%. Adjusting for the impact of foreign currency translation, assets increased $16 billion or 5%, mainly due to growth in corporate loans and acceptances of $8 billion and increases in trading assets of $8 billion.
Average liabilities
Average liabilities of $273 billion increased by $31 billion or 13%. Adjusting for the impact of foreign currency translation, average liabilities increased $34 billion or 14%. This was mainly due to growth of $18 billion in deposits and $16 billion in securities sold under repurchase agreements.
Net interest income
Net interest income of $345 million was up $72 million or 26%. This was due mainly to higher loan origination fees and higher lending volumes and deposits in Canada, the U.S. and Europe, which was partly offset by lower volumes in Asia. The net interest margin was up 18 basis points to 1.78%.
Non-interest income
Non-interest income was $830 million, an increase of $174 million or 27%. This was mainly due to stronger revenues in fixed income trading, higher underwriting and advisory fees, and higher credit fees.
Provision for credit losses
The provision for credit losses was up $12 million to $39 million due to higher provisions in Asia and the U.S., partially offset by lower provisions in Canada. The provision for credit losses ratio was up five basis points to 19 basis points.
Non-interest expenses
Non-interest expenses of $533 million were up $83 million or 18%. This was due to higher performance-related and stock-based compensation, technology, compliance and regulatory costs, partly offset by lower salaries.
Taxes
The effective tax rate for the quarter was 23.4% compared to 28.1%. The lower tax rate was mainly due to higher taxes in foreign jurisdictions in the prior year.
Q4 2016 vs. Q3 2016
Net income
Net income attributable to equity holders increased by $40 million or 10%. This was mainly due to stronger results in fixed income and corporate banking, partly offset by lower contributions from commodities and investment banking.
Average assets
Average assets increased by $10 billion or 3%, mainly due to growth in trading assets.
Average liabilities
Average liabilities increased by $9 billion or 3% due to growth in securities sold under repurchase agreements, as well as higher deposits.
Net interest income
Net interest income was up $8 million or 2%. This was due mainly to higher loan origination fees, increased lending volumes in Canada and Europe, and higher deposit interest.
Non-interest income
Non-interest income was up $16 million or 2%. This was mainly due to higher fixed income trading revenues, partly offset by lower advisory and underwriting fees.
Provision for credit losses
The provision for credit losses was $39 million this quarter, up $1 million due to higher provisions in Asia and Canada, offset by a decrease in provisions for the U.S. and Europe. The provision for credit losses ratio was unchanged at 19 basis points.
Non-interest expenses
Non-interest expenses increased $26 million or 5%. This was mainly driven by higher performance-related and stock-based compensation, compliance and technology costs, partly offset by lower salaries.
Taxes
The effective tax rate for the quarter was 23.4% compared to 30.5%. The lower tax rate was mainly due to higher taxes in foreign jurisdictions in the prior quarter.
Other(1)
For the three months ended For the year ended
----------------------------------------------------------------------------
(Unaudited) ($
millions)
(Taxable
equivalent October 31 July 31 October 31 October 31 October 31
basis)(2) 2016 2016 2015 2016 2015
----------------------------------------------------------------------------
Business segment
income
Net interest
income(3) $ (105) $ (101) $ (69) $ (384) $ (100)
Non-interest
income(4) 71 123 36 273 35
------------------------------------------------------------
Total revenue (34) 22 (33) (111) (65)
Provision for
credit losses - - 60 50 60
Non-interest
expenses(5) 92 86 (90) 653 86
Income tax
expense(3) (103) (83) (120) (545) (475)
----------------------------------------------------------------------------
Net income $ (23) $ 19 $ 117 $ (269) $ 264
----------------------------------------------------------------------------
Net income
attributable to
non-controlling
interest $ - $ - $ - $ - $ -
Net income
attributable to
equity holders
of the Bank $ (23) $ 19 $ 117 $ (269) $ 264
----------------------------------------------------------------------------
Other measures
Average assets
($ billions) $ 113 $ 117 $ 101 $ 111 $ 91
Average
liabilities ($
billions) $ 244 $ 249 $ 263 $ 247 $ 257
----------------------------------------------------------------------------
(1) Includes all other smaller operating segments and corporate
adjustments, such as the elimination of the tax-exempt income gross-up
reported in net interest income, non-interest income and provision for
income taxes and differences in the actual amount of costs incurred and
charged to the operating segments.
(2) Results are presented on a taxable equivalent basis. Refer to Business
Line Overview section of the Bank's 2016 Annual Report.
(3) Includes the elimination of the tax-exempt income gross-up reported in
net interest income, non-interest income and provision for income taxes
for the three months ended October 31, 2016 $47, July 31, 2016 $50,
October 31, 2015 $73, and the years ended October 31, 2016 $299 and
October 31, 2015 $390 to arrive at the amounts reported in the
Consolidated Statement of Income.
(4) Includes net income from investments in associated corporations for the
three months ended October 31, 2016 - $(38) (July 31, 2016 - $(33);
October 31, 2015 - $(31)) and for the year ended October 31, 2016 -
$(137) (October 31, 2015 - ($137)).
(5) Includes restructuring charge of $378 recorded in Q2 2016.
The Other segment includes Group Treasury, smaller operating segments, business line elimination items and other corporate items which are not allocated to a business line.
Net interest income, non-interest income, and income taxes in each period include the elimination of tax-exempt income gross-up. This amount is included in the operating segments, which are reported on a taxable equivalent basis. The elimination was $47 million in the fourth quarter, compared to $73 million in the same period last year and $50 million last quarter.
Net income from investments in associated corporations and the provision for income taxes in each period include the tax normalization adjustments related to the gross-up of income from associated companies. This adjustment normalizes the effective tax rate in the divisions to better present the contribution of the associated companies to the divisional results.
Q4 2016 vs Q4 2015
Net loss attributable to equity holders was $23 million in the quarter, compared to a net income of $117 million the same quarter last year.
Last year included a number of largely offsetting items, comprised of a reduction in pension benefit accrual related to modifications made to the Bank's main pension plan of $204 million pre-tax, ($151 million after tax), an increase to the collective allowance for credit losses against performing loans of $60 million pre-tax ($44 million after tax), and reorganization costs related to Canadian Banking's shared services operations of $61 million pre-tax ($45 million after tax).
Adjusting for these items, income declined by $78 million. Lower contributions from asset/liability management activities, higher expenses and higher taxes, and lower net gains on investment securities were partly offset by gains on sale of real estate and the positive impact of foreign currency translation.
Q4 2016 vs Q3 2016
Net loss attributable to equity holders was $23 million, compared to a net income of $19 million. The decrease was due to the impact of foreign currency translation, and higher taxes, while lower net gains on investment securities were partly offset by gains on sale of real estate.
Consolidated Statement of Financial Position
As at
----------------------------------------------------------------------------
October 31 July 31 October 31
(Unaudited) ($ millions) 2016 2016 2015
----------------------------------------------------------------------------
Assets
Cash and deposits with financial
institutions $ 46,344 $ 69,774 $ 73,927
Precious metals 8,442 10,243 10,550
Trading assets
Securities 87,287 81,625 78,380
Loans 19,421 20,278 18,341
Other 1,853 1,958 2,419
----------------------------------------------------------------------------
108,561 103,861 99,140
----------------------------------------------------------------------------
Financial instruments designated
at fair value through profit or
loss 221 228 320
Securities purchased under resale
agreements and securities
borrowed 92,129 92,266 87,312
Derivative financial instruments 41,657 43,990 41,003
Investment securities 72,919 69,914 43,216
Loans
Residential mortgages 222,888 219,460 217,498
Personal and credit cards 99,502 98,062 91,477
Business and government 162,400 159,820 153,850
----------------------------------------------------------------------------
484,790 477,342 462,825
Allowance for credit losses 4,626 4,542 4,197
----------------------------------------------------------------------------
480,164 472,800 458,628
Other
Customers' liability under
acceptances 11,978 10,409 10,296
Property and equipment 2,520 2,441 2,286
Investments in associates 4,299 4,199 4,033
Goodwill and other intangible
assets 12,141 11,693 11,449
Deferred tax assets 2,021 2,135 2,034
Other assets 12,870 12,891 12,303
----------------------------------------------------------------------------
45,829 43,768 42,401
----------------------------------------------------------------------------
Total assets $ 896,266 $ 906,844 $ 856,497
----------------------------------------------------------------------------
Liabilities
Deposits
Personal $ 199,302 $ 195,840 $ 190,044
Business and government 372,303 387,099 375,144
Financial institutions 40,272 48,405 35,731
----------------------------------------------------------------------------
611,877 631,344 600,919
Financial instruments designated
at fair value through profit or
loss 1,459 1,643 1,486
Other
Acceptances 11,978 10,409 10,296
Obligations related to securities
sold short 23,312 20,869 20,212
Derivative financial instruments 42,387 46,428 45,270
Obligations related to securities
sold under repurchase agreements
and securities lent 97,083 93,990 77,015
Subordinated debentures 7,633 7,598 6,182
Other liabilities 42,716 39,259 41,638
----------------------------------------------------------------------------
225,109 218,553 200,613
----------------------------------------------------------------------------
Total liabilities 838,445 851,540 803,018
----------------------------------------------------------------------------
Equity
Common equity
Common shares 15,513 15,314 15,141
Retained earnings 34,752 33,750 31,316
Accumulated other comprehensive
income (loss) 2,240 1,531 2,455
Other reserves 152 166 173
----------------------------------------------------------------------------
Total common equity 52,657 50,761 49,085
Preferred shares 3,594 3,094 2,934
----------------------------------------------------------------------------
Total equity attributable to
equity holders of the Bank 56,251 53,855 52,019
Non-controlling interests in
subsidiaries 1,570 1,449 1,460
----------------------------------------------------------------------------
Total equity 57,821 55,304 53,479
----------------------------------------------------------------------------
Total liabilities and equity $ 896,266 $ 906,844 $ 856,497
----------------------------------------------------------------------------
Consolidated Statement of Income
For the three months ended For the year ended
----------------------------------------------------------------------------
(Unaudited) ($ October 31 July 31 October 31 October 31 October 31
millions) 2016 2016 2015 2016 2015
----------------------------------------------------------------------------
Revenue
Interest income
Loans $ 5,220 $ 5,146 $ 4,849 $ 20,419 $ 18,912
Securities 334 333 225 1,237 922
Securities
purchased under
resale
agreements and
securities
borrowed 46 35 41 158 161
Deposits with
financial
institutions 99 106 72 394 292
----------------------------------------------------------------------------
5,699 5,620 5,187 22,208 20,287
----------------------------------------------------------------------------
Interest expense
Deposits 1,786 1,750 1,508 6,793 6,070
Subordinated
debentures 57 57 49 232 187
Other 203 211 259 891 938
----------------------------------------------------------------------------
2,046 2,018 1,816 7,916 7,195
----------------------------------------------------------------------------
Net interest
income 3,653 3,602 3,371 14,292 13,092
----------------------------------------------------------------------------
Non-interest
income
Banking 957 918 873 3,669 3,360
Wealth
management 837 818 809 3,282 3,269
Underwriting and
other advisory 170 202 109 594 525
Non-trading
foreign
exchange 136 131 122 540 492
Trading revenues 377 381 277 1,403 1,185
Net gain on sale
of investment
securities 96 143 182 534 639
Net income from
investments in
associated
corporations 117 97 96 414 405
Insurance
underwriting
income, net of
claims 150 153 147 603 556
Other 258 195 139 1,019 526
----------------------------------------------------------------------------
3,098 3,038 2,754 12,058 10,957
----------------------------------------------------------------------------
Total revenue 6,751 6,640 6,125 26,350 24,049
Provision for
credit losses 550 571 551 2,412 1,942
----------------------------------------------------------------------------
6,201 6,069 5,574 23,938 22,107
----------------------------------------------------------------------------
Non-interest
expenses
Salaries and
employee
benefits 1,747 1,754 1,544 7,025 6,681
Premises and
technology 600 548 564 2,238 2,086
Depreciation and
amortization 183 173 157 684 584
Communications 111 106 110 442 434
Advertising and
business
development 184 152 184 617 592
Professional 214 169 161 693 548
Business and
capital taxes 97 96 88 403 361
Other 514 507 478 2,438 1,755
----------------------------------------------------------------------------
3,650 3,505 3,286 14,540 13,041
----------------------------------------------------------------------------
Income before
taxes 2,551 2,564 2,288 9,398 9,066
Income tax
expense 540 605 445 2,030 1,853
----------------------------------------------------------------------------
Net income $ 2,011 $ 1,959 $ 1,843 $ 7,368 $ 7,213
----------------------------------------------------------------------------
Net income
attributable to
non-controlling
interests in
subsidiaries $ 72 $ 62 $ 60 $ 251 $ 199
Net income
attributable to
equity holders
of the Bank $ 1,939 $ 1,897 $ 1,783 $ 7,117 $ 7,014
Preferred
shareholders 31 37 29 130 117
Common
shareholders $ 1,908 $ 1,860 $ 1,754 $ 6,987 $ 6,897
----------------------------------------------------------------------------
Earnings per
common share(in
dollars)
Basic $ 1.58 $ 1.55 $ 1.46 $ 5.80 $ 5.70
Diluted $ 1.57 $ 1.54 $ 1.45 $ 5.77 $ 5.67
Dividends per
common share
(in dollars) $ 0.74 $ 0.72 $ 0.70 $ 2.88 $ 2.72
----------------------------------------------------------------------------
Consolidated Statement of Comprehensive Income
For the three months ended For the year ended
----------------------------------------------------------------------------
October July October October October
(Unaudited) ($ millions) 31 2016 31 2016 31 2015 31 2016 31 2015
----------------------------------------------------------------------------
Net income $ 2,011 $ 1,959 $ 1,843 $ 7,368 $ 7,213
Other comprehensive income
(loss)
Items that will be
reclassified subsequently
to net income
Net change in unrealized
foreign currency
translation gains
(losses):
Net unrealized foreign
currency translation
gains (losses) 1,176 1,324 (311) 614 3,145
Net gains (losses) on
hedges of net
investments in foreign
operations (434) (475) 45 (300) (1,677)
Income tax expense
(benefit):
Net unrealized foreign
currency translation
gains (losses) 6 10 1 (3) 46
Net gains (losses) on
hedges of net
investments in foreign
operations (115) (125) 10 (79) (433)
----------------------------------------------------------------------------
851 964 (277) 396 1,855
Net change in unrealized
gains (losses) on
available-for-sale
securities:
Net unrealized gains
(losses) on available-
for-sale securities (111) 385 (134) 308 386
Reclassification of net
(gains) losses to net
income(1) 49 (339) (176) (549) (966)
Income tax expense
(benefit):
Net unrealized gains
(losses) on available-
for-sale securities (32) 101 24 82 161
Reclassification of net
(gains) losses to net
income 13 (87) (26) (151) (261)
----------------------------------------------------------------------------
(43) 32 (308) (172) (480)
Net change in gains
(losses) on derivative
instruments designated
as cash flow hedges:
Net gains (losses) on
derivative instruments
designated as cash flow
hedges (279) 360 (23) (7) 1,519
Reclassification of net
(gains) losses 29 (252) 176 357 (1,444)
Income tax expense
(benefit):
Net gains (losses) on
derivative instruments
designated as cash
flow hedges (73) 101 (19) 9 450
Reclassification of net
(gains) losses 7 (72) 61 83 (430)
----------------------------------------------------------------------------
(184) 79 111 258 55
----------------------------------------------------------------------------
Other comprehensive
income (loss) from
investments in
associates 8 (7) (3) 31 (9)
----------------------------------------------------------------------------
Items that will not be
reclassified subsequently
to net income
Net change in
remeasurement of
employee benefit plan
asset and liability:
Actuarial gains (losses)
on employee benefit
plans 190 (528) 332 (972) (3)
Income tax expense
(benefit) 51 (141) 81 (256) (2)
----------------------------------------------------------------------------
139 (387) 251 (716) (1)
Net change in fair value
due to change in own
credit risk on financial
liabilities designated
under the fair value
option:
Change in fair value due
to change in own credit
risk on financial
liabilities designated
under the fair value
option (4) (4) 12 (23) 20
Income tax expense
(benefit) (1) (1) 3 (7) 5
----------------------------------------------------------------------------
(3) (3) 9 (16) 15
----------------------------------------------------------------------------
Other comprehensive
income (loss) from
investments in
associates - - - (10) 1
----------------------------------------------------------------------------
Other comprehensive income
(loss) 768 678 (217) (229) 1,436
----------------------------------------------------------------------------
Comprehensive income (loss) $ 2,779 $ 2,637 $ 1,626 $ 7,139 $ 8,649
----------------------------------------------------------------------------
Comprehensive income (loss)
attributable to non-
controlling interests $ 131 $ 34 $ 61 $ 237 $ 124
----------------------------------------------------------------------------
Comprehensive income (loss)
attributable to equity
holders of the Bank $ 2,648 $ 2,603 $ 1,565 $ 6,902 $ 8,525
Preferred shareholders 31 37 29 130 117
Common shareholders $ 2,617 $ 2,566 $ 1,536 $ 6,772 $ 8,408
----------------------------------------------------------------------------
(1) Includes amounts related to qualifying hedges.
Consolidated Statement of Changes in Equity
Accumulated other
comprehensive income (loss)
----------------------------
Foreign Available-
(Unaudited) ($ Common Retained currency for-sale
millions) shares earnings(1) translation securities
----------------------------------------------------------------------------
Balance as at
November 1, 2015 $ 15,141 $ 31,316 $ 2,633 $ 194
Net income - 6,987 - -
Other comprehensive
income (loss) - - 422 (180)
----------------------------------------------------------------------------
Total comprehensive
income $ - $ 6,987 $ 422 $ (180)
Shares issued 391 - - -
Shares repurchased/
redeemed (19) (61) - -
Common dividends
paid - (3,468) - -
Preferred dividends
paid - - - -
Distributions to
non-contolling
interests - - - -
Share-based payments - - - -
Other - (22) - -
----------------------------------------------------------------------------
Balance as at
October 31, 2016 $ 15,513 $ 34,752 $ 3,055 $ 14
----------------------------------------------------------------------------
Balance as at
November 1, 2014 $ 15,231 $ 28,609 $ 700 $ 664
Net income - 6,897 - -
Other comprehensive
income (loss) - - 1,933 (470)
----------------------------------------------------------------------------
Total comprehensive
income $ - $ 6,897 $ 1,933 $ (470)
Shares issued 104 - - -
Shares repurchased/
redeemed (194) (761) - -
Common dividends
paid - (3,289) - -
Preferred dividends
paid - - - -
Distributions to
non-contolling
interests - - - -
Share-based payments - - - -
Other - (140)(5) - -
----------------------------------------------------------------------------
Balance as at
October 31, 2015 $ 15,141 $ 31,316 $ 2,633 $ 194
----------------------------------------------------------------------------
Balance as reported
November 1, 2013 $ 14,516 $ 25,315 $ (173) $ 705
Opening
adjustment(7) - (247) - -
--------------------------------------------------------
Restated balance 14,516 25,068 (173) 705
Net income - 6,916 - -
Other comprehensive
income (loss) - - 873 (41)
----------------------------------------------------------------------------
Total comprehensive
income $ - $ 6,916 $ 873 $ (41)
Shares issued 771 3 - -
Shares repurchased/
redeemed (56) (264) - -
Common dividends
paid - (3,110) - -
Preferred dividends
paid - - - -
Distributions to
non-contolling
interests - - - -
Share-based payments - - - -
Other - (4) - -
----------------------------------------------------------------------------
Balance as at
October 31, 2014 $ 15,231 $ 28,609 $ 700 $ 664
----------------------------------------------------------------------------
Accumulated other
comprehensive income (loss)
----------------------------
(Unaudited) ($ Cash flow Other
millions) hedges Other(2) reserves(3)
--------------------------------------------------------------
Balance as at
November 1, 2015 $ 7 $ (379) $ 173
Net income - - -
Other comprehensive
income (loss) 257 (714) -
--------------------------------------------------------------
Total comprehensive
income $ 257 $ (714) $ -
Shares issued - - -
Shares repurchased/
redeemed - - (28)
Common dividends
paid - - -
Preferred dividends
paid - - -
Distributions to
non-contolling
interests - - -
Share-based payments - - 7
Other - - -
--------------------------------------------------------------
Balance as at
October 31, 2016 $ 264 $ (1,093) $ 152
--------------------------------------------------------------
Balance as at
November 1, 2014 $ (48) $ (367) $ 176
Net income - - -
Other comprehensive
income (loss) 55 (7) -
--------------------------------------------------------------
Total comprehensive
income $ 55 $ (7) $ -
Shares issued - - (17)
Shares repurchased/
redeemed - - -
Common dividends
paid - - -
Preferred dividends
paid - - -
Distributions to
non-contolling
interests - - -
Share-based payments - - 14
Other - (5)(6) -
--------------------------------------------------------------
Balance as at
October 31, 2015 $ 7 $ (379) $ 173
--------------------------------------------------------------
Balance as reported
November 1, 2013 $ (42) $ 55 $ 193
Opening
adjustment(7) - (157) -
------------------------------------------
Restated balance (42) (102) 193
Net income - - -
Other comprehensive
income (loss) (6) (265) -
--------------------------------------------------------------
Total comprehensive
income $ (6) $ (265) $ -
Shares issued - - (34)
Shares repurchased/
redeemed - - -
Common dividends
paid - - -
Preferred dividends
paid - - -
Distributions to
non-contolling
interests - - -
Share-based payments - - 30
Other - - (13)(8)
--------------------------------------------------------------
Balance as at
October 31, 2014 $ (48) $ (367) $ 176
--------------------------------------------------------------
Total Total common
(Unaudited) ($ common Preferred and preferred
millions) equity shares equity
--------------------------------------------------------------
Balance as at
November 1, 2015 $ 49,085 $ 2,934 $ 52,019
Net income 6,987 130 7,117
Other comprehensive
income (loss) (215) - (215)
--------------------------------------------------------------
Total comprehensive
income $ 6,772 $ 130 $ 6,902
Shares issued 363 1,350 1,713
Shares repurchased/
redeemed (80) (690) (770)
Common dividends
paid (3,468) - (3,468)
Preferred dividends
paid - (130) (130)
Distributions to
non-contolling
interests - - -
Share-based payments 7 - 7
Other (22) - (22)
--------------------------------------------------------------
Balance as at
October 31, 2016 $ 52,657 $ 3,594 $ 56,251
--------------------------------------------------------------
Balance as at
November 1, 2014 $ 44,965 $ 2,934 $ 47,899
Net income 6,897 117 7,014
Other comprehensive
income (loss) 1,511 - 1,511
--------------------------------------------------------------
Total comprehensive
income $ 8,408 $ 117 $ 8,525
Shares issued 87 - 87
Shares repurchased/
redeemed (955) - (955)
Common dividends
paid (3,289) - (3,289)
Preferred dividends
paid - (117) (117)
Distributions to
non-contolling
interests - - -
Share-based payments 14 - 14
Other (145) - (145)
--------------------------------------------------------------
Balance as at
October 31, 2015 $ 49,085 $ 2,934 $ 52,019
--------------------------------------------------------------
Balance as reported
November 1, 2013 $ 40,569 $ 4,084 $ 44,653
Opening
adjustment(7) (404) - (404)
------------------------------------------
Restated balance 40,165 4,084 44,249
Net income 6,916 155 7,071
Other comprehensive
income (loss) 561 - 561
--------------------------------------------------------------
Total comprehensive
income $ 7,477 $ 155 $ 7,632
Shares issued 740 - 740
Shares repurchased/
redeemed (320) (1,150) (1,470)
Common dividends
paid (3,110) - (3,110)
Preferred dividends
paid - (155) (155)
Distributions to
non-contolling
interests - - -
Share-based payments 30 - 30
Other (17) - (17)
--------------------------------------------------------------
Balance as at
October 31, 2014 $ 44,965 $ 2,934 $ 47,899
--------------------------------------------------------------
Non-controlling interests
----------------------------
Non- Capital
controlling instruments
(Unaudited) ($ interest in equity
millions) subsidiaries holders Total
--------------------------------------------------------------
Balance as at
November 1, 2015 $ 1,460 $ - $ 53,479
Net income 251 - 7,368
Other comprehensive
income (loss) (14) - (229)
--------------------------------------------------------------
Total comprehensive
income $ 237 $ - $ 7,139
Shares issued - - 1,713
Shares repurchased/
redeemed - - (770)
Common dividends
paid - - (3,468)
Preferred dividends
paid - - (130)
Distributions to
non-contolling
interests (116) - (116)
Share-based payments - - 7
Other (11)(4) - (33)
--------------------------------------------------------------
Balance as at
October 31, 2016 $ 1,570 $ - $ 57,821
--------------------------------------------------------------
Balance as at
November 1, 2014 $ 1,312 $ - $ 49,211
Net income 199 - 7,213
Other comprehensive
income (loss) (75) - 1,436
--------------------------------------------------------------
Total comprehensive
income $ 124 $ - $ 8,649
Shares issued - - 87
Shares repurchased/
redeemed - - (955)
Common dividends
paid - - (3,289)
Preferred dividends
paid - - (117)
Distributions to
non-contolling
interests (86) - (86)
Share-based payments - - 14
Other 110(4) - (35)
--------------------------------------------------------------
Balance as at
October 31, 2015 $ 1,460 $ - $ 53,479
--------------------------------------------------------------
Balance as reported
November 1, 2013 $ 1,155 $ 743 $ 46,551
Opening
adjustment(7) (17) (743) (1,164)
------------------------------------------
Restated balance 1,138 - 45,387
Net income 227 - 7,298
Other comprehensive
income (loss) 22 - 583
--------------------------------------------------------------
Total comprehensive
income $ 249 $ - $ 7,881
Shares issued - - 740
Shares repurchased/
redeemed - - (1,470)
Common dividends
paid - - (3,110)
Preferred dividends
paid - - (155)
Distributions to
non-contolling
interests (76) - (76)
Share-based payments - - 30
Other 1(4) - (16)
--------------------------------------------------------------
Balance as at
October 31, 2014 $ 1,312 $ - $ 49,211
--------------------------------------------------------------
(1) Includes undistributed retained earnings of $63 (2015 - $61; 2014 -
$52) related to a foreign associated corporation, which is subject to
local regulatory restriction.
(2) Includes Share from associates, Employee benefits and Own credit risk.
(3) Represents amounts on account of share-based payments.
(4) Includes changes to non-controlling interests arising from business
combinations and others.
(5) Includes retrospective adjustments primarily related to foreign
currency translation on Allowance for Credit Losses with respect to
periods prior to 2013 ($152).
(6) Represents retrospective adjustments to reflect the adoption of the own
credit risk provisions of IFRS 9 pertaining to financial liabilities
designated at fair value through profit or loss.
(7) Certain prior period amounts are retrospectively adjusted to reflect
the adoption of new and amended IFRS standards (IFRS 10 and IAS 19) in
2014.
(8) Includes impact of Tandem SARs voluntarily renounced by certain
employees while retaining their corresponding option for shares.
Consolidated Statement of Cash Flows
For the three months
(Unaudited) ($ millions) ended For the year ended
----------------------------------------------------------------------------
October 31 October 31 October 31 October 31
Sources (uses) of cash flows 2016 2015 2016 2015
----------------------------------------------------------------------------
Cash flows from operating
activities
Net income $ 2,011 $ 1,843 $ 7,368 $ 7,213
Adjustment for:
Net interest income (3,653) (3,371) (14,292) (13,092)
Depreciation and
amortization 183 157 684 584
Provisions for credit
losses 550 551 2,412 1,942
Equity-settled share-based
payment expense - 2 7 14
Net gain on sale of
investment securities (96) (182) (534) (639)
Net gain on disposition of
business - - (116) -
Net income from
investments in associated
corporations (117) (96) (414) (405)
Income tax expense 540 445 2,030 1,853
Restructuring charge - - 378 -
Changes in operating assets
and liabilities:
Trading assets (3,830) 4,238 (10,044) 20,302
Securities purchased under
resale agreements and
securities borrowed 1,239 99 (5,363) 13,991
Loans (3,615) (9,265) (20,355) (22,942)
Deposits (26,509) (807) 6,702 13,915
Obligations related to
securities sold short 2,528 (3,162) 4,007 (8,101)
Obligations related to
assets sold under
repurchase agreements and
securities lent 1,844 (516) 20,865 (18,982)
Net derivative financial
instruments (2,331) 2,687 (3,806) 2,442
Other, net 2,305 (3,402) 1,856 4,707
Dividends received 135 217 873 1,147
Interest received 5,480 4,846 21,099 19,145
Interest paid (1,875) (1,644) (7,787) (7,262)
Income tax paid 47 (352) (1,471) (1,985)
----------------------------------------------------------------------------
Net cash from/(used in)
operating activities (25,164) (7,712) 4,099 13,847
----------------------------------------------------------------------------
Cash flows from investing
activities
Interest-bearing deposits
with financial institutions 23,659 8,640 28,447 (8,448)
Purchase of investment
securities (16,306) (11,310) (94,441) (44,684)
Proceeds from sale and
maturity of investment
securities 14,305 8,836 65,069 41,649
Acquisition/sale of
subsidiaries, associated
corporations or business
units, net of cash acquired - - (1,050) (701)
Property and equipment, net
of disposals (54) (145) (348) (282)
Other, net (306) (406) (431) (1,053)
----------------------------------------------------------------------------
Net cash from/(used in)
investing activities 21,298 5,615 (2,754) (13,519)
----------------------------------------------------------------------------
Cash flows from financing
activities
Proceeds from issue of
subordinated debentures - 12 2,465 1,248
Redemption/ repayment of
subordinated debentures - (12) (1,035) (18)
Proceeds from common shares
issued 199 22 391 101
Proceeds from preferred
shares issued 500 - 1,350 -
Redemption of preferred
shares - - (690) -
Common share purchased for
cancellation - (311) (80) (955)
Cash dividends paid (924) (870) (3,598) (3,406)
Distributions to non-
controlling interests (11) (12) (116) (86)
Other, net 3,381 3,112 117 3,379
----------------------------------------------------------------------------
Net cash from/(used in)
financing activities 3,145 1,941 (1,196) 263
----------------------------------------------------------------------------
Effect of exchange rate
changes on cash and cash
equivalents 121 (39) (18) 305
----------------------------------------------------------------------------
Net change in cash and cash
equivalents (600) (195) 131 896
Cash and cash equivalents at
beginning of period(1) 7,455 6,919 6,724 5,828
----------------------------------------------------------------------------
Cash and cash equivalents at
end of year(1) $ 6,855 $ 6,724 $ 6,855 $ 6,724
----------------------------------------------------------------------------
(1) Represents cash and non-interest bearing deposits with financial
institutions.
Basis of preparation
These unaudited consolidated financial statements were prepared in accordance with IFRS as issued by International Accounting Standards Board (IASB) and accounting requirements of OSFI in accordance with Section 308 of the Bank Act, except for certain required disclosures. Therefore, these unaudited consolidated financial statements should be read in conjunction with the Bank's audited consolidated financial statements for the year ended October 31, 2016 which will be available today at www.scotiabank.com.
Forward looking statements
Our public communications often include oral or written forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may include, but are not limited to, statements made in this document, the Management's Discussion and Analysis in the Bank's 2016 Annual Report under the headings "Overview-Outlook," for Group Financial Performance "Outlook," for each business segment "Outlook" and in other statements regarding the Bank's objectives, strategies to achieve those objectives, the regulatory environment in which the Bank operates, anticipated financial results (including those in the area of risk management), and the outlook for the Bank's businesses and for the Canadian, U.S. and global economies. Such statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intent," "estimate," "plan," "may increase," "may fluctuate," and similar expressions of future or conditional verbs, such as "will," "may," "should," "would" and "could."
By their very nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not prove to be accurate. Do not unduly rely on forward-looking statements, as a number of important factors, many of which are beyond the Bank's control and the effects of which can be difficult to predict, could cause actual results to differ materially from the estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to: the economic and financial conditions in Canada and globally; fluctuations in interest rates and currency values; liquidity and funding; significant market volatility and interruptions; the failure of third parties to comply with their obligations to the Bank and its affiliates; changes in monetary policy; legislative and regulatory developments in Canada and elsewhere, including changes to, and interpretations of tax laws and risk-based capital guidelines and reporting instructions and liquidity regulatory guidance; changes to the Bank's credit ratings; operational (including technology) and infrastructure risks; reputational risks; the risk that the Bank's risk management models may not take into account all relevant factors; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services in receptive markets; the Bank's ability to expand existing distribution channels and to develop and realize revenues from new distribution channels; the Bank's ability to complete and integrate acquisitions and its other growth strategies; critical accounting estimates and the effects of changes in accounting policies and methods used by the Bank as described in the Bank's annual financial statements (See "Controls and Accounting Policies-Critical accounting estimates" in the Bank's 2016 Annual Report) and updated by this document;
global capital markets activity; the Bank's ability to attract and retain key executives; reliance on third parties to provide components of the Bank's business infrastructure; unexpected changes in consumer spending and saving habits; technological developments; fraud or other criminal behavior by internal or external parties, including the use of new technologies in unprecedented ways to defraud the Bank or its customers; increasing cyber security risks which may include theft of assets, unauthorized access to sensitive information or operational disruption; anti-money laundering; consolidation in the financial services sector in Canada and globally; competition, both from new entrants and established competitors including through internet and mobile banking; judicial and regulatory proceedings; natural disasters, including, but not limited to, earthquakes and hurricanes, and disruptions to public infrastructure, such as transportation, communication, power or water supply; the possible impact of international conflicts and other developments, including terrorist activities and war; the effects of disease or illness on local, national or international economies; and the Bank's anticipation of and success in managing the risks implied by the foregoing. A substantial amount of the Bank's business involves making loans or otherwise committing resources to specific companies, industries or countries. Unforeseen events affecting such borrowers, industries or countries could have a material adverse effect on the Bank's financial results, businesses, financial condition or liquidity. These and other factors may cause the Bank's actual performance to differ materially from that contemplated by forward-looking statements. For more information, see the "Risk Management" section of the Bank's 2016 Annual Report.
Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2016 Annual Report under the heading "Overview-Outlook," as updated by this document; and for each business segment "Outlook". The "Outlook" sections are based on the Bank's views and the actual outcome is uncertain. Readers should consider the above-noted factors when reviewing these sections. The preceding list of factors is not exhaustive of all possible risk factors and other factors could also adversely affect the Bank's results. When relying on forward-looking statements to make decisions with respect to the Bank and its securities, investors and others should carefully consider the preceding factors, other uncertainties and potential events. The Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf.
Additional information relating to the Bank, including the Bank's Annual Information Form, can be located on the SEDAR website at www.sedar.com and on the EDGAR section of the SEC's website at www.sec.gov.
November 29, 2016
Shareholder and investor information
Direct deposit service
Shareholders may have dividends deposited directly into accounts held at financial institutions which are members of the Canadian Payments Association. To arrange direct deposit service, please write to the transfer agent.
Dividend and Share Purchase Plan
Scotiabank's dividend reinvestment and share purchase plan allows common and preferred shareholders to purchase additional common shares by reinvesting their cash dividend without incurring brokerage or administrative fees. As well, eligible shareholders may invest up to $20,000 each fiscal year to purchase additional common shares of the Bank. All administrative costs of the plan are paid by the Bank. For more information on participation in the plan, please contact the transfer agent.
Dividend dates for 2017
Record and payment dates for common and preferred shares, subject to approval by the Board of Directors.
Record Date Payment Date January 3 January 27 April 4 April 26 July 4 July 27 October 3 October 27
Annual Meeting date for fiscal 2016
Shareholders are invited to attend the 185th Annual Meeting of Holders of Common Shares, to be held on April 4, 2017, at the Scotiabank Centre, Scotia Plaza, 40 King Street West, 2nd Floor, Toronto, Ontario, beginning at 9:00 a.m. local time. The record date for determining shareholders entitled to receive notice of and to vote at the meeting will be the close of business on February 7, 2017.
Duplicated communication
If your shareholdings are registered under more than one name or address, multiple mailings will result. To eliminate this duplication, please write to the transfer agent to combine the accounts.
Normal Course Issuer Bid
A copy of the Notice of Intention to commence the Normal Course Issuer Bid is available without charge by contacting the Secretary's Department at (416) 866-3672.
Website
For information relating to Scotiabank and its services, visit us at our website: www.scotiabank.com.
Conference call and Web broadcast
The quarterly results conference call will take place on November 29, 2016, at 8:00 am EST and is expected to last approximately one hour. Interested parties are invited to access the call live, in listen-only mode, by telephone, toll-free, at (416) 847-6330 or 1-866-530-1553 (please call five to 15 minutes in advance). In addition, an audio webcast, with accompanying slide presentation, may be accessed via the Investor Relations page of www.scotiabank.com. Following discussion of the results by Scotiabank executives, there will be a question and answer session.
A telephone replay of the conference call will be available from November 29, 2016, to December 14, 2016, by calling (647) 436-0148 or 1-888-203-1112 (North America toll-free) and entering the identification code 3242919#. The archived audio webcast will be available on the Bank's website for three months.
Contact information
Investors: Media: Scotiabank Contact the Public, Corporate and Scotia Plaza, 44 King Street West Government Affairs Department Toronto, Ontario, Canada M5H 1H1 Scotia Plaza, 44 King Street West Telephone: (416) 775-0798 Toronto, Ontario, Canada M5H 1H1 Fax: (416) 866-7867 Telephone: (416) 866-6806 E-mail: Fax: (416) 866-4988 [email protected] E-mail: [email protected] Shareholders: For enquiries related to changes in share registration or address, dividend information, lost share certificates, estate transfers, or to advise of duplicate mailings, please contact the Bank's transfer agent: Computershare Trust Company of For other shareholder enquiries, please Canada contact the Finance Department: 100 University Avenue, 8th Floor Scotiabank Toronto, Ontario, Canada M5J 2Y1 Scotia Plaza, 44 King Street West Telephone: 1-877-982-8767 Toronto, Ontario, Canada M5H 1H1 Fax: 1-888-453-0330 Telephone: (416) 866-4790 E-mail: [email protected] Fax: (416) 866-4048 E-mail: Co-Transfer Agent (U.S.A.) [email protected] Computershare Trust Company N.A. 250 Royall Street Canton, MA 02021 U.S.A. Telephone: 1-800-962-4284
Rapport trimestriel disponible en francais
Le Rapport annuel et les etats financiers de la Banque sont publies en francais et en anglais et distribues aux actionnaires dans la version de leur choix. Si vous preferez que la documentation vous concernant vous soit adressee en francais, veuillez en informer Relations publiques, Affaires de la societe et Affaires gouvernementales, La Banque de Nouvelle-Ecosse, Scotia Plaza, 44, rue King Ouest, Toronto (Ontario), Canada M5H 1H1, en joignant, si possible, l'etiquette d'adresse, afin que nous puissions prendre note du changement.
Contacts: Jake Lawrence Investor Relations Scotiabank (416) 866-5712 Heather Armstrong Public, Corporate and Government Affairs Scotiabank (416) 933-3250
Source: Scotiabank
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