Canadian Commercial Banking and Wealth Management – 2018 Financial Review

  • Revenue
    ($ billions)
    2016: 3.3, 2017: 3.6, 2018: 3.9
  • Net income
    ($ millions)
    2016: 991, 2017: 1,138, 2018: 1,307
  • Efficiency ratio
    (%)
    2016: 57.8, 2017: 56.3, 2018: 53.5
  • Average loans
    ($ billions)
    2016: 48.3, 2017: 52.8, 2018: 57.8
  • Average deposits
    ($ billions)
    2016: 43.4, 2017: 48.8, 2018: 53.2
  • Average commercial banking loans
    ($ billions)
     
    2016: 46.6, 2017: 51.1, 2018: 55.8
  • Average commercial banking deposits
    ($ billions)
     
    2016: 37.4, 2017: 42.7, 2018: 47.6
  • Assets under administration and management(1A)
    ($ billions)
    2016: 252.0, 2017: 274.5, 2018: 269.0
  • Canadian retail mutual funds
    ($ billions)
     
    2016: 90.8, 2017: 101.4, 2018: 101.1
(1A)
AUM amounts are included in the amounts reported under AUA.

Results(1B)

Table of Results for Canadian Commercial Banking and Wealth Management for the last three years from 2018 to 2016.
$ millions, for the year ended October 31 2018 2017 2016
Revenue
Commercial banking $ 1,488 $ 1,324 $ 1,211
Wealth management 2,377 2,266 2,061
Total revenue 3,865 3,590 3,272
Provision for (reversal of) credit losses
Impaired(2B)   15   16   29
Performing(2B) (10) n/a n/a
Provision for credit losses 5 16 29
Non-interest expenses 2,068 2,021 1,890
Income before income taxes 1,792 1,553 1,353
Income taxes 485 415 362
Net income $ 1,307 $ 1,138 $ 991
Net income attributable to:
Equity shareholders (a) $ 1,307 $ 1,138 $ 991
Efficiency ratio 53.5 % 56.3 % 57.8 %
Return on equity(3B) 39.8 % 37.6 % 34.5 %
Charge for economic capital(3B) (b) $ (322) $ (295) $ (279)
Economic profit(3B) (a+b) $ 985 $ 843 $ 712
Average assets ($ billions) $ 55.7 $ 50.8 $ 46.6
Average loans ($ billions) $ 57.8   $ 52.8   $ 48.3
Average deposits ($ billions) $ 53.2 $ 48.8 $ 43.4
AUA ($ billions) $ 269.0 $ 274.5 $ 252.0
AUM ($ billions) $ 164.6 $ 162.5 $ 145.3
Full-time equivalent employees 4,999 5,081 4,986
(1B)
For additional segmented information, see Note 30 to the consolidated financial statements.
(2B)
As a result of our adoption of IFRS 9 effective November 1, 2017, we now recognize provision for credit losses on both impaired and performing loans in the SBU. In prior years, provision for credit losses on performing loans was recognized in Corporate and Other.
(3B)
For additional information, see the “Non-GAAP measures” section.
n/a
Not applicable.

Financial overview

Net income was up $169 million or 15% from 2017, primarily due to higher revenue, partially offset by higher non-interest expenses.

Revenue

Revenue was up $275 million or 8% from 2017.

Commercial banking revenue was up $164 million or 12%, primarily due to volume growth, wider spreads and higher fees.

Wealth management revenue was up $111 million or 5%, primarily due to higher investment management and custodial fees and mutual fund fees from higher average AUM and AUA, partially offset by lower commission revenue driven by lower equity issuance activity and a decline in transaction volume.

Provision for credit losses

Provision for credit losses was down $11 million or 69% from 2017, primarily due to a reduction in allowance for performing loans in the current year, driven by model parameter updates and an economic outlook that has improved since our adoption of IFRS 9 on November 1, 2017.

Non-interest expenses

Non-interest expenses were up $47 million or 2% from 2017, primarily due to higher performance-based and employee-related compensation.

Income taxes

Income taxes were up $70 million or 17% from 2017, primarily due to higher income.

Average assets

Average assets were up $4.9 billion or 10% from 2017, primarily due to growth in commercial loans.

Assets under administration

AUA were down $5.5 billion or 2% from 2017, primarily due to market conditions, in particular volatility in equity markets in the fourth quarter of 2018. AUM amounts are included in the amounts reported under AUA.