This news release and
accompanying financial highlights are supplementary to CWB's 2024
First Quarter Report to Shareholders and 2023 Annual Report and
should be read in conjunction with those documents.
|
EDMONTON, AB, March 1,
2024 /CNW/ - CWB Financial Group (TSX: CWB)
(CWB) announced financial performance for the three months ended
January 31, 2024, with quarterly
common shareholders' net income of $88
million, down 7% from the prior year, primarily due to an
increase in the provision for credit losses as a percentage of
average loans(1) to within our historical normal range.
Net income was elevated in the prior year due to a large recovery
recognized in the provision for credit losses. Pre-tax,
pre-provision income(1) increased by 14% compared to the
prior year as net interest margin(1) growth and prudent
expense management drove positive operating leverage(1)
of 7.1%.
Quarterly common shareholders' net income increased 14%
sequentially, primarily driven by lower non-interest expenses due
to costs incurred in the prior quarter related to the
reorganization of our operations. Adjusted earnings per share
common share (EPS)(1) of $0.93 was down one
cent from last quarter, as lower adjusted non-interest
expenses(1) was more than offset by the expected
increase in the provision for credit losses to within our normal
historical range.
Our Board of Directors declared a cash dividend of $0.34 per common share, consistent with the
dividend declared last quarter and up two
cents, or 6%, from last year.
"CWB's focused performance continued in the first quarter with
positive operating leverage driven by disciplined expense
management while targeting new lending opportunities that met our
risk adjusted return expectations in the current environment," said
Chris Fowler, President and CEO.
"Our strong balance sheet, prudent risk management, and the
differentiated experience we provide to our clients supports the
continued delivery of solid results."
"Our financial outlook for 2024 is unchanged and we are well
positioned to create value for our investors in the year
ahead."
Financial Performance
Q1 2024,
compared to
Q1 2023(1)
|
Common shareholders'
net income
|
$88 million
|
Down 7%
|
Diluted EPS
Adjusted EPS
|
$0.91
$0.93
|
Down 8%
Down 9%
|
Adjusted Return on
Equity (ROE)
|
10.1 %
|
Down 190 bp
|
Efficiency
ratio
|
49.2 %
|
Down 350 bp
|
Pre-tax, pre-provision
income
|
$147 million
|
Up 14%
|
(1)
|
Provision for credit
losses as a percentage of average loans, pre-tax, pre-provision
income, net interest margin, operating leverage, adjusted EPS,
adjusted non-interest expenses, adjusted ROE and efficiency ratio
are non-GAAP measures. Refer to definitions and detail provided on
pages 3 and 4.
|
Common shareholders' net income decreased 7% compared to the
same quarter last year as a 6% increase in revenue and a 1% decline
in non-interest expenses were more than offset by an increase in
the total provision for credit losses as a percentage of average
loans. An expanding net interest margin and prudent expense
management drove 7.1% operating leverage and a 14% increase in our
pre-tax, pre-provision income compared to the prior year.
Higher revenue was primarily driven by a 7% increase in net
interest income, which reflected the benefit of an eight basis
point increase in net interest margin and 1% annual loan growth.
The increase in net interest margin primarily reflected the benefit
of increased yields on fixed term assets from higher market
interest rates, which had a larger impact than the increase in
deposit costs.
Non-interest expenses were down 1% from the prior year,
primarily driven by lower people costs associated with a reduction
in our overall staffing levels following our reorganization
activities last quarter. This impact was partially offset by higher
depreciation expense associated with the opening of our new
Toronto financial district banking
centre and the phased roll-out of our new commercial digital and
cash management platform initiated in the quarter.
The provision for credit losses on total loans as a percentage
of average loans was 28 basis point higher than the same quarter
last year, reflecting a 31 basis point increase in the impaired
loan provision, offset by a three basis point decrease in the
performing loan provision. The prior year impaired loan provision
represented a 12 basis point recovery, primarily due to the
reversal of a previously recognized impaired loan
write-off.
Q1 2024,
compared to
Q4 2023
|
Common shareholders'
net income
|
$88 million
|
Up 14%
|
Diluted EPS
Adjusted EPS
|
$0.91
$0.93
|
Up 14%
Down 1%
|
Adjusted Return on
Equity (ROE)
|
10.1 %
|
Down 50 bp
|
Efficiency
ratio
|
49.2 %
|
Down 180 bp
|
Pre-tax, pre-provision
income
|
$147 million
|
Up 3%
|
Compared to the prior quarter, common shareholders' net income
increased 14% as lower non-interest expenses were partially offset
by an increase in the total provision for credit losses and a 1%
decline in revenue. Adjusted common shareholders' net income
decreased 1%, while pre-tax, pre-provision income increased 3%.
Lower revenue reflected a 13% decline in non-interest income, as
we recognized elevated foreign exchange gains in the prior quarter,
partially offset by a 1% increase in net interest income. Net
interest margin was consistent with the prior quarter as the
negative impact of higher average liquidity was offset by increased
yields on fixed term assets that exceeded the increase in deposit
costs in the quarter.
Non-interest expenses were down 13%, primarily driven by costs
incurred in the previous quarter related to the reorganization of
our operations, with the remaining reorganization activities fully
completed within the current quarter. Adjusted non-interest
expenses were down 4%, primarily due to lower people costs
following our reorganization activities, and lower spend due to the
timing of ongoing strategic execution activities.
The provision for credit losses on total loans as a percentage
of average loans represented 19 basis points this quarter and was
eight basis points higher than last quarter. A 19 basis point
impaired loan provision, compared to an eight basis point provision
last quarter and reflects the expected return to a level within our
historical normal range of 18 to 23 basis points.
About CWB Financial Group
CWB Financial Group (CWB) is the only full-service bank in
Canada with a strategic focus to
meet the unique financial needs of businesses and their owners. We
provide our nationwide clients with full-service business and
personal banking, specialized financing, comprehensive wealth
management offerings, and trust services. Clients choose CWB for a
differentiated level of service through specialized expertise,
customized solutions, and faster response times relative to the
competition. Our people take the time to understand our clients and
their business, and work as a united team to provide holistic
solutions and advice.
As a public company on the Toronto Stock Exchange (TSX), CWB
trades under the symbols "CWB" (common shares), "CWB.PR.B" (Series
5 preferred shares) and "CWB.PR.D" (Series 9 preferred shares). We
are firmly committed to the responsible creation of value for all
our stakeholders and our approach to sustainability will support
our continued success. Learn more at www.cwb.com.
Fiscal 2024 First
Quarter Results Conference Call
|
CWB's first quarter
results conference call is scheduled for Friday, March 1, 2024, at
10:00 a.m. ET (8:00 a.m. MT). CWB's executives will comment
on financial results and respond to questions from
analysts.
|
The conference call may
be accessed on a listen-only basis by dialing (416) 764-8688
(Toronto) or 1 (888) 390-0546 (toll-free) and entering passcode:
79296021. The call will also be webcast live on CWB's
website:
|
www.cwb.com/investor-relations/quarterly-reports.
|
A replay of the
conference call will be available until March 8, 2024 by dialing
(416) 764-8677 (Toronto) or 1 (888) 390-0541 (toll-free) and
entering passcode: 296021#.
|
Forward-looking Statements
From time to time, we make written and verbal forward-looking
statements. Statements of this type are included in our Annual
Report and reports to shareholders and may be included in filings
with Canadian securities regulators or in other communications such
as media releases and corporate presentations. Forward-looking
statements include, but are not limited to, statements about our
objectives and strategies, targeted and expected financial results
and the outlook for CWB's businesses or for the Canadian economy.
Forward-looking statements are typically identified by the words
"believe", "expect", "anticipate", "intend", "estimate", "may
increase", "may impact", "goal", "focus", "potential", "proposed"
and other similar expressions, or future or conditional verbs such
as "will", "should", "would" and "could".
By their very nature, forward-looking statements involve
numerous assumptions and are subject to inherent risks and
uncertainties, which give rise to the possibility that our
predictions, forecasts, projections, expectations, and conclusions
will not prove to be accurate, that our assumptions may not be
correct, and that our strategic goals will not be achieved.
A variety of factors, many of which are beyond our control, may
cause actual results to differ materially from the expectations
expressed in the forward-looking statements. These factors include,
but are not limited to, general business and economic conditions in
Canada including housing and
commercial real estate market conditions and household and business
indebtedness, the volatility and level of liquidity in financial
markets, fluctuations in interest rates and currency values, the
volatility and level of various commodity prices, changes in
monetary policy, changes in economic and political conditions,
material changes to trade agreements, transition to the Advanced
Internal Ratings Based (AIRB) approach for regulatory capital
purposes, legislative and regulatory developments, changes in
supervisory expectations or requirements for capital, interest rate
and liquidity management, legal developments, the level of
competition, the occurrence of natural catastrophes, outbreaks of
disease or illness that affect local, national or international
economies, changes in accounting standards and policies,
information technology and cyber risk, the accuracy and
completeness of information we receive about customers and
counterparties, the ability to attract and retain key personnel,
the ability to complete and integrate acquisitions, reliance on
third parties to provide components of business infrastructure,
changes in tax laws, technological developments, unexpected changes
in consumer spending and saving habits, timely development and
introduction of new products, the impact of bank failures or other
adverse developments at other banks that drive negative investor
and depositor sentiment regarding the stability and liquidity of
banks, and our ability to anticipate and manage the risks
associated with these factors. It is important to note that the
preceding list is not exhaustive of possible factors.
Additional information about these factors can be found in the
Risk Management section of our 2023 Annual MD&A. These and
other factors should be considered carefully, and readers are
cautioned not to place undue reliance on these forward-looking
statements as a number of important factors could cause our actual
results to differ materially from the expectations expressed in
such forward-looking statements. Any forward-looking statements
contained in this document represent our views as of the date
hereof. Unless required by securities law, we do not undertake to
update any forward-looking statement, whether written or verbal,
that may be made from time to time by us or on our behalf. The
forward-looking statements contained in this document are presented
for the purpose of assisting readers in understanding our financial
position and results of operations as at and for the periods ended
on the dates presented, as well as our strategic priorities and
objectives, and may not be appropriate for other purposes.
Assumptions about the performance of the Canadian economy over
the forecast horizon and how it will affect our business are
material factors considered when setting organizational objectives
and targets. In determining expectations for economic growth, we
consider our own forecasts, economic data and forecasts provided by
the Canadian government and its agencies, as well as certain
private sector forecasts. These forecasts are subject to inherent
risks and uncertainties that may be general or specific. Where
relevant, material economic assumptions underlying forward-looking
statements are disclosed within the Outlook and Allowance
for Credit Losses sections of our interim and Annual
MD&A.
Non-GAAP Measures
We use a number of financial measures and ratios to assess our
performance against strategic initiatives and operational
benchmarks. Some of these financial measures and ratios do not have
standardized meanings prescribed by Generally Accepted Accounting
Principles (GAAP) and may not be comparable to similar measures
presented by other financial institutions. Non-GAAP financial
measures and ratios provide readers with an enhanced understanding
of how we view our financial performance. These measures and ratios
may also provide the ability to analyze trends related to
profitability and the effectiveness of our operations and
strategies and are disclosed in compliance with National
Instrument 52-112 Non-GAAP and Other Financial Measures
Disclosure.
To calculate non-GAAP financial measures, we
exclude certain items from our financial results prepared
in accordance with IFRS. Adjustments relate to items which we
believe are not indicative of underlying operating performance. Our
non-GAAP financial measures include:
- Adjusted non-interest expenses – total non-interest expenses,
excluding pre-tax costs associated with a reorganization of our
operations, amortization of acquisition-related intangible assets,
and acquisition and integration costs. Non-recurring reorganization
costs were incurred to execute reorganization initiatives to
realize efficiencies in our banking centre footprint, operational
support functions, and administrative processes. Acquisition and
integration costs include direct and incremental costs incurred as
part of the execution and integration of business
acquisitions.
- Adjusted common shareholders' net income – total common
shareholders' net income, excluding the costs associated with
organizational redesign initiatives, accelerated amortization of
acquisition-related intangible assets, and acquisition and
integration costs, net of tax.
- Pre-tax, pre-provision income – total revenue less adjusted
non-interest expenses.
The following table provides a reconciliation of our non-GAAP
financial measures to our reported financial results.
|
|
For the three months
ended
|
|
Change from
January 31 2023
|
|
(unaudited)
(thousands)
|
|
|
January 31
2024
|
|
|
October 31
2023
|
|
|
January 31
2023
|
|
|
Non-interest
expenses
|
|
$
|
145,627
|
|
$
|
167,600
|
|
$
|
147,217
|
|
(1)
|
%
|
Adjustments (before
tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recurring
reorganization costs
|
|
|
(1,202)
|
|
|
(17,146)
|
|
|
-
|
|
100
|
|
Amortization of
acquisition-related intangible assets
|
|
|
(1,728)
|
|
|
(1,728)
|
|
|
(2,981)
|
|
(42)
|
|
Acquisition and
integration costs
|
|
|
-
|
|
|
-
|
|
|
(375)
|
|
(100)
|
|
Adjusted
non-interest expenses
|
|
$
|
142,697
|
|
$
|
148,726
|
|
$
|
143,861
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders'
net income adjustments (after-tax):
|
|
$
|
87,921
|
|
$
|
76,845
|
|
$
|
94,363
|
|
(7)
|
%
|
Non-recurring
reorganization costs (1)
|
|
|
894
|
|
|
12,726
|
|
|
-
|
|
100
|
|
Amortization of
acquisition-related intangible assets(2)
|
|
|
1,268
|
|
|
1,267
|
|
|
2,446
|
|
(48)
|
|
Acquisition and
integration costs(3)
|
|
|
-
|
|
|
-
|
|
|
281
|
|
(100)
|
|
Adjusted common
shareholders' net income
|
|
$
|
90,083
|
|
$
|
90,838
|
|
$
|
97,090
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
$
|
289,991
|
|
$
|
291,763
|
|
$
|
272,891
|
|
6
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
non-interest expenses (see above)
|
|
|
142,697
|
|
|
148,726
|
|
|
143,861
|
|
(1)
|
%
|
Pre-tax,
pre-provision income
|
|
$
|
147,294
|
|
$
|
143,037
|
|
$
|
129,030
|
|
14
|
|
(1)
|
Net of income tax of
$308 for the three months ended January 31, 2024 (Q4 2023 – $4,420,
Q1 2023 – $nil).
|
(2)
|
Net of income tax of
$460 for the three months ended January 31, 2024 (Q4 2023 – $461,
Q1 2023 – $535).
|
(3)
|
Net of income tax of
$nil for the three months ended January 31, 2024 (Q4 2023 – $nil,
Q1 2023 – $94).
|
Non-GAAP ratios are calculated using the non-GAAP financial
measures defined above. Our non-GAAP ratios include:
- Adjusted earnings per common share – diluted earnings per
common share calculated with adjusted common shareholders' net
income.
- Adjusted return on common shareholders' equity – annualized
adjusted common shareholders' net income divided by average common
shareholders' equity, which is total shareholders' equity excluding
preferred shares and limited recourse capital notes.
- Efficiency ratio – adjusted non-interest expenses divided by
total revenue.
- Operating leverage – growth rate of total revenue less growth
rate of adjusted non-interest expenses.
Supplementary financial measures are measures that do not have
definitions prescribed by GAAP, but do not meet the definition of a
non-GAAP financial measure or ratio. Our supplementary
financial measures include:
- Return on assets – annualized common shareholders' net income
divided by average total assets.
- Net interest margin – annualized net interest income divided by
average total assets.
- Return on common shareholders' equity – annualized common
shareholders' net income divided by average common shareholders'
equity.
- Write-offs as a percentage of average loans – annualized
write-offs divided by average total loans.
- Book value per common share – total common shareholders' equity
divided by total common shares outstanding.
- Franchise deposits (formerly referred to as branch-raised
deposits) – total deposits excluding broker term and capital market
deposits.
- Provision for credit losses on total loans as a percentage of
average loans – annualized provision for credit losses on loans,
committed but undrawn credit exposures and letters of credit
divided by average total loans. Provisions for credit losses
related to debt securities measured at fair value through other
comprehensive income (FVOCI) and other financial assets are
excluded.
- Provision for credit losses on impaired loans as a percentage
of average loans – annualized provision for credit losses on
impaired loans divided by average total loans.
- Provision for credit losses on performing loans as a percentage
of average loans – annualized provision for credit losses on
performing loans (Stage 1 and 2) divided by average total
loans.
- Average balances – average daily balances.
Selected Financial Highlights
|
|
For the three months
ended
|
|
Change from
January 31
2023
|
|
(unaudited)
(thousands, except per
share amounts)
|
|
January 31
2024
|
|
|
October 31
2023
|
|
|
January 31
2023
|
|
|
Results from
Operations
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
$
|
259,071
|
|
$
|
256,316
|
|
$
|
242,280
|
|
7
|
%
|
Non-interest
income
|
|
30,920
|
|
|
35,447
|
|
|
30,611
|
|
1
|
|
Total
revenue
|
|
289,991
|
|
|
291,763
|
|
|
272,891
|
|
6
|
|
Pre-tax,
pre-provision income(1)
|
|
147,294
|
|
|
143,037
|
|
|
129,030
|
|
14
|
|
Common
shareholders' net income
|
|
87,921
|
|
|
76,845
|
|
|
94,363
|
|
(7)
|
|
Common Share
Information
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.91
|
|
$
|
0.80
|
|
$
|
0.99
|
|
(8)
|
%
|
Diluted
|
|
0.91
|
|
|
0.80
|
|
|
0.99
|
|
(8)
|
|
Adjusted(1)
|
|
0.93
|
|
|
0.94
|
|
|
1.02
|
|
(9)
|
|
Cash
dividends
|
|
0.34
|
|
|
0.33
|
|
|
0.32
|
|
6
|
|
Book
value(1)
|
|
37.11
|
|
|
35.79
|
|
|
34.26
|
|
8
|
|
Closing market
value
|
|
29.61
|
|
|
27.48
|
|
|
28.12
|
|
5
|
|
Common shares
outstanding (thousands)
|
|
96,485
|
|
|
96,434
|
|
|
96,229
|
|
-
|
|
Performance
Measures(1)
|
|
|
|
|
|
|
|
|
|
|
|
Return on common
shareholders' equity
|
|
9.9
|
%
|
|
9.0
|
%
|
|
11.6
|
%
|
(170)
|
bp
|
Adjusted return
on common shareholders' equity
|
|
10.1
|
|
|
10.6
|
|
|
12.0
|
|
(190)
|
|
Return on
assets
|
|
0.82
|
|
|
0.72
|
|
|
0.90
|
|
(8)
|
|
Net interest
margin
|
|
2.40
|
|
|
2.40
|
|
|
2.32
|
|
8
|
|
Efficiency
ratio
|
|
49.2
|
|
|
51.0
|
|
|
52.7
|
|
(350)
|
|
Operating
leverage
|
|
7.1
|
|
|
3.3
|
|
|
(9.0)
|
|
1,610
|
|
Credit
Quality(1)
|
|
|
|
|
|
|
|
|
|
|
|
Provision for
(recovery of) credit losses on total loans as a percentage of
average loans(2)
|
|
0.19
|
|
|
0.11
|
|
|
(0.09)
|
|
28
|
|
Provision for
(recovery of) credit losses on impaired loans as a percentage of
average loans(2)
|
|
0.19
|
|
|
0.08
|
|
|
(0.12)
|
|
31
|
|
Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
$
|
42,694,873
|
|
$
|
42,320,103
|
|
$
|
41,706,375
|
|
2
|
%
|
Loans(3)
|
|
36,942,450
|
|
|
37,209,850
|
|
|
36,416,656
|
|
1
|
|
Deposits
|
|
33,487,898
|
|
|
33,328,449
|
|
|
33,113,849
|
|
1
|
|
Debt
|
|
3,991,534
|
|
|
3,839,159
|
|
|
3,803,068
|
|
5
|
|
Shareholders'
equity
|
|
4,155,537
|
|
|
4,026,667
|
|
|
3,871,964
|
|
7
|
|
Off-Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
|
Wealth
Management
|
|
|
|
|
|
|
|
|
|
|
|
Assets
under management and administration
|
|
8,629,063
|
|
|
7,925,785
|
|
|
8,260,366
|
|
4
|
|
Assets
under advisement(4)
|
|
2,355,753
|
|
|
2,197,397
|
|
|
1,924,278
|
|
22
|
|
Assets Under
Administration - Other
|
|
16,744,975
|
|
|
15,370,989
|
|
|
14,290,188
|
|
17
|
|
Capital
Adequacy(5)
|
|
|
|
|
|
|
|
|
|
|
|
Common equity
Tier 1 ratio
|
|
10.0
|
%
|
|
9.7
|
%
|
|
9.1
|
%
|
90
|
bp
|
Tier 1
ratio
|
|
11.8
|
|
|
11.5
|
|
|
10.9
|
|
90
|
|
Total
ratio
|
|
14.6
|
|
|
13.5
|
|
|
12.8
|
|
180
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Number of
full-time equivalent staff
|
|
2,454
|
|
|
2,505
|
|
|
2,737
|
|
(10)
|
%
|
(1)
|
Non-GAAP measure –
refer to definitions and detail provided on pages 3 and
4.
|
(2)
|
Includes provisions for
credit losses on loans, committed but undrawn credit exposures and
letters of credit.
|
(3)
|
Excludes the allowance
for credit losses.
|
(4)
|
Primarily comprised of
assets under advisement related to our Indigenous Services wealth
management business.
|
(5)
|
Calculated using the
Standardized approach in accordance with guidelines issued
by the Office of the Superintendent of Financial Institutions
Canada (OSFI).
|
|
bp – basis
point
|
SOURCE CWB Financial Group