National Bank Releases 2013 Financial Information to Reflect Changes in Accounting Standards and the Common Stock Split

This press release provides unaudited financial information prepared in accordance with International Financial Reporting Standards (IFRS), adjusted for year ended October 31, 2013, to reflect changes in accounting standards and the common stock split. This document is available on the SEDAR website at sedar.com and on the Bank's website at nbc.ca. An additional information document, Supplementary Financial Information - Adjusted to Reflect Changes in Accounting Standards and the Common Stock Split, is also available at nbc.ca.

Highlights:

• Including the changes in accounting standards, adjusted net income for fiscal 2013 was $1,512 million compared to the reported $1,554 million;
• Including the changes in accounting standards and the common stock split, adjusted diluted earnings per share stood at $4.31 for fiscal 2013 compared to the reported $8.80.

Highlights Excluding Specified Items⁽¹⁾:

• Including the changes in accounting standards, adjusted net income for fiscal 2013 was $1,423 million compared to the reported $1,491 million;
• Including the changes in accounting standards and the common stock split, adjusted diluted earnings per share stood at $4.04 for fiscal 2013 compared to the reported $8.41.
  
  

MONTREAL, Jan. 31, 2014 /CNW Telbec/ - National Bank of Canada (the Bank) is releasing fiscal 2013 adjusted financial information to reflect changes in accounting standard IAS 19 - Employee Benefits, the application of new accounting standard IFRS 10 - Consolidated Financial Statements and the impact of the common stock split by means of a stock dividend approved by the Board of Directors (the Board) on December 3, 2013. On February 25, 2014, the Bank will publish its interim condensed consolidated financial statements for the first quarter ending January 31, 2014 in accordance with IAS 34 - Interim Financial Reporting and provide comparative figures for 2013 to reflect the accounting changes and stock split.

The following information is being presented to help users of the Bank's consolidated financial statements better understand the impact of the retrospective application of the accounting standard changes and of the common stock split on the comparative consolidated financial statements for fiscal 2013. This information should be read in conjunction with Note 2 to the audited consolidated financial statements in the 2013 Annual Report (pages 116 and 117) and with the additional information document, Supplementary Financial Information - Adjusted to Reflect Changes in Accounting Standards and the Common Stock Split.

In accordance with IFRS, on November 1, 2013, the Bank adopted the amendments to the accounting standards and adjusted its fiscal 2013 consolidated financial statements following retrospective application of these changes. The Bank also retrospectively adjusted the 2013 common share numbers and per-share calculations to reflect the stock dividend of one common share on each issued and outstanding common share declared on December 3, 2013. Details of the adjusted financial information are provided below.

For the year ended October 31, 2013
(in millions of Canadian dollars)

				Net income			Diluted earnings per share (dollars)
		Under IFRS		Excluding  specified  items	^(1)		Under IFRS		Excluding specified items	^(1)
As reported		1,554		1,491			8.80		8.41
Impact of common stock split							(4.40)		(4.20)
Adjusted after common stock split		1,554		1,491			4.40		4.21
Impact of IAS 19 - Employee Benefits		(30)		(56)			(0.09)		(0.17)
Impact of IFRS 10 - Consolidated Financial Statements		(12)		(12)			−		−
Adjusted after changes to accounting standards and common stock split		1,512		1,423			4.31		4.04

 
(1) The Bank uses certain measures that do not comply with IFRS to assess results. The Bank cautions readers that adjusted measures have no standardized meaning under IFRS and cannot be easily compared with similar measures used by other companies.

Adjustments related to IAS 19 - Employee Benefits

In June 2011, the International Accounting Standards Board (IASB) issued an amended version of IAS 19. The amendments introduced significant changes to the recognition of employee benefits, mainly with respect to defined benefit pension plans. For the Bank, the revised standard had an impact on net income and other comprehensive income for the year ended October 31, 2013 and on the consolidated balance sheet as at October 31, 2013.

The impact on net income and other comprehensive income for the year ended October 31, 2013 is summarized below:

• The expected return on plan assets is no longer used in calculating pension plan expense. The discount rate used to measure the accrued benefit obligation must also be used to measure the return on plan assets. This amendment resulted in a $51 million decrease ($70 million before deduction of income taxes) in Net income for the year ended October 31, 2013 and a $51 million increase in Other comprehensive income, net of income taxes.
  
  
• During the first quarter of 2013, the Bank made changes to the provisions of its pension plans and other post-retirement plans, specifically regarding the normal retirement age, which reduced past service costs. Revised IAS 19 requires that this reduction be fully recognized in the period in which the plans are changed rather than in subsequent periods. Accordingly, under revised IAS 19, the Bank recognized a $35 million decrease in past service costs ($26 million net of income taxes presented as a specified item⁽¹⁾) in the first quarter of 2013, whereas it had recorded a $6 million decrease ($5 million net of income taxes) in fiscal 2013 in accordance with the previous accounting standard. These adjustments increased Net Income for the year ended October 31, 2013 by $21 million.

As at October 31, 2013, the impact on the consolidated balance sheet of the amendments to employee benefits translates into a $15 million increase in Other assets, a $6 million decrease in Other liabilities and a $21 million increase in Retained earnings. The amendments to IAS 19 had no impact on the consolidated balance sheet as at November 1, 2012.

Adjustments related to IFRS 10 - Consolidated Financial Statements

IFRS 10 replaces the consolidation guidance formerly set out in IAS 27 - Consolidated and Separate Financial Statements and interpretation SIC-12 - Consolidation - Special Purpose Entities, by establishing a single consolidation model based on control that applies to all interests held in all types of entities (investees). According to IFRS 10, control is based on the concepts of decision-making authority regarding the investee's relevant activities, exposure or rights to variable returns from its involvement with the investee, and the ability to use its power to affect the amount of returns. An entity must consolidate the entities it controls and present consolidated financial statements.

The Bank has applied IFRS 10 retrospectively, which has resulted in the deconsolidation of NBC Capital Trust (the Trust). Under IFRS 10, the Bank does not control the Trust because the Bank's interest does not expose it to variable returns. The retrospective application of this standard translates into a $12 million decrease in Net income for the year ended October 31, 2013 and into a $225 million increase in Deposits, a $4 million increase in Other liabilities and a $229 million decrease in Non-controlling interests on the consolidated balance sheets as at November 1, 2012, and October 31, 2013.

Adjustments related to the common stock split by means of a stock dividend

On December 3, 2013, the Board declared a stock dividend of one common share on each issued and outstanding common share, payable on February 13, 2014 to common shareholders of record on February 6, 2014. The effect is the same as a two-for-one split of common shares. All common share numbers and per-share calculations have been adjusted retrospectively to reflect the stock dividend.

Financial information provided

The financial information provided in this press release reflects the adjustments made by the Bank for the year ended October 31, 2013 and includes the following:
1) Condensed consolidated quarterly results;
2) Condensed consolidated quarterly cumulative and annual results; and
3) Condensed consolidated balance sheets.

1) Condensed Consolidated Quarterly Results

																					Quarter ended
			January 31, 2013						April 30, 2013						July 31, 2013						October 31, 2013
(unaudited) (millions of Canadian dollars)			Reported		Adjustments		Adjusted		Reported		Adjustments		Adjusted		Reported		Adjustments		Adjusted		Reported		Adjustments		Adjusted
Condensed consolidated results excluding specified items^(1)
Net interest income			599		(3)		596		625		(3)		622		636		(3)		633		598		(3)		595
Non-interest income			626		−		626		626		−		626		658		−		658		665		−		665
Total revenues			1,225		(3)		1,222		1,251		(3)		1,248		1,294		(3)		1,291		1,263		(3)		1,260
Non-interest expenses			747		19		766		769		19		788		783		19		802		772		19		791
Provisions for credit losses			32		−		32		53		−		53		48		−		48		48		−		48
Income before income taxes (recovery)			446		(22)		424		429		(22)		407		463		(22)		441		443		(22)		421
Income taxes (recovery)			85		(5)		80		60		(5)		55		72		(5)		67		73		(5)		68
Net income excluding specified items			361		(17)		344		369		(17)		352		391		(17)		374		370		(17)		353
Specified items after income taxes			3		26		29		65		−		65		28		−		28		(33)		−		(33)
Net income			364		9		373		434		(17)		417		419		(17)		402		337		(17)		320
Excluding specified items^(1)
Earnings per share (dollars)
	Basic		2.04		(1.06)		0.98		2.10		(1.09)		1.01		2.23		(1.16)		1.07		2.11		(1.10)		1.01
	Diluted		2.02		(1.05)		0.97		2.08		(1.08)		1.00		2.22		(1.15)		1.07		2.09		(1.09)		1.00
Condensed consolidated results under IFRS
Net interest income			599		(3)		596		623		(3)		620		632		(3)		629		595		(3)		592
Non-interest income			636		−		636		763		−		763		656		−		656		659		−		659
Total revenues			1,235		(3)		1,232		1,386		(3)		1,383		1,288		(3)		1,285		1,254		(3)		1,251
Non-interest expenses			753		(16)		737		815		19		834		789		19		808		808		19		827
Provisions for credit losses			32		−		32		53		−		53		48		−		48		48		−		48
Income before income taxes (recovery)			450		13		463		518		(22)		496		451		(22)		429		398		(22)		376
Income taxes (recovery)			86		4		90		84		(5)		79		32		(5)		27		61		(5)		56
Net income			364		9		373		434		(17)		417		419		(17)		402		337		(17)		320
Net income attributable to
	Bank shareholders		344		12		356		416		(14)		402		401		(14)		387		318		(14)		304
	Non-controlling interests		20		(3)		17		18		(3)		15		18		(3)		15		19		(3)		16
			364		9		373		434		(17)		417		419		(17)		402		337		(17)		320
Weighted average basic number of common shares outstanding (thousands)			161,585		161,585		323,170		162,278		162,278		324,556		162,386		162,386		324,772		162,687		162,687		325,374
Weighted average diluted number of common shares outstanding (thousands)			163,045		163,045		326,090		163,538		163,538		327,076		163,588		163,588		327,176		164,297		164,296		328,593
Earnings per share (dollars)
	Basic		2.05		(0.99)		1.06		2.50		(1.29)		1.21		2.41		(1.25)		1.16		1.91		(1.00)		0.91
	Diluted		2.03		(0.98)		1.05		2.49		(1.29)		1.20		2.39		(1.23)		1.16		1.89		(0.99)		0.90
Condensed consolidated comprehensive income under IFRS
Net income			364		9		373		434		(17)		417		419		(17)		402		337		(17)		320
Other comprehensive income, net of income taxes
Items that may be subsequently reclassified to net income			(5)		−		(5)		34		−		34		(79)		−		(79)		10		−		10
Item that will not be subsequently reclassified to net income
	Actuarial gains and losses on employee benefit plans		10		12		22		(43)		13		(30)		151		13		164		(65)		13		(52)
Share in the other comprehensive income of associates and joint ventures			(1)		−		(1)		1		−		1		−		−		−		(1)		−		(1)
Comprehensive income			368		21		389		426		(4)		422		491		(4)		487		281		(4)		277

(1) The Bank uses certain measures that do not comply with IFRS to assess results. The Bank cautions readers that adjusted measures have no standardized meaning under IFRS and cannot be easily compared with similar measures used by other companies.

2) Condensed Consolidated Quarterly Cumulative and Annual Results

			Quarter ended January 31, 2013						Six months ended April 30, 2013						Nine months ended July 31, 2013						Year ended October 31, 2013
(unaudited) (millions of Canadian dollars)			Reported		Adjustments		Adjusted		Reported		Adjustments		Adjusted		Reported		Adjustments		Adjusted		Reported		Adjustments		Adjusted
Condensed consolidated results excluding specified items^(1)
Net interest income			599		(3)		596		1,224		(6)		1,218		1,860		(9)		1,851		2,458		(12)		2,446
Non-interest income			626		−		626		1,252		−		1,252		1,910		−		1,910		2,575		−		2,575
Total revenues			1,225		(3)		1,222		2,476		(6)		2,470		3,770		(9)		3,761		5,033		(12)		5,021
Non-interest expenses			747		19		766		1,516		38		1,554		2,299		57		2,356		3,071		76		3,147
Provisions for credit losses			32		−		32		85		−		85		133		−		133		181		−		181
Income before income taxes (recovery)			446		(22)		424		875		(44)		831		1,338		(66)		1,272		1,781		(88)		1,693
Income taxes (recovery)			85		(5)		80		145		(10)		135		217		(15)		202		290		(20)		270
Net income excluding specified items			361		(17)		344		730		(34)		696		1,121		(51)		1,070		1,491		(68)		1,423
Specified items after income taxes^(1)			3		26		29		68		26		94		96		26		122		63		26		89
Net income			364		9		373		798		(8)		790		1,217		(25)		1,192		1,554		(42)		1,512
Excluding specified items^(1)
Earnings per share (dollars)
	Basic		2.04		(1.06)		0.98		4.14		(2.15)		1.99		6.37		(3.31)		3.06		8.48		(4.41)		4.07
	Diluted		2.02		(1.05)		0.97		4.10		(2.13)		1.97		6.32		(3.28)		3.04		8.41		(4.37)		4.04
Condensed consolidated results under IFRS
Net interest income			599		(3)		596		1,222		(6)		1,216		1,854		(9)		1,845		2,449		(12)		2,437
Non-interest income			636		−		636		1,399		−		1,399		2,055		−		2,055		2,714		−		2,714
Total revenues			1,235		(3)		1,232		2,621		(6)		2,615		3,909		(9)		3,900		5,163		(12)		5,151
Non-interest expenses			753		(16)		737		1,568		3		1,571		2,357		22		2,379		3,165		41		3,206
Provisions for credit losses			32		−		32		85		−		85		133		−		133		181		−		181
Income before income taxes (recovery)			450		13		463		968		(9)		959		1,419		(31)		1,388		1,817		(53)		1,764
Income taxes (recovery)			86		4		90		170		(1)		169		202		(6)		196		263		(11)		252
Net income			364		9		373		798		(8)		790		1,217		(25)		1,192		1,554		(42)		1,512
Net income attributable to
	Bank shareholders		344		12		356		760		(2)		758		1,161		(16)		1,145		1,479		(30)		1,449
	Non-controlling interests		20		(3)		17		38		(6)		32		56		(9)		47		75		(12)		63
			364		9		373		798		(8)		790		1,217		(25)		1,192		1,554		(42)		1,512
Weighted average basic number of common shares outstanding (thousands)			161,585		161,585		323,170		161,926		161,926		323,852		162,081		162,081		324,162		162,234		162,234		324,468
Weighted average diluted number of common shares outstanding (thousands)			163,045		163,045		326,090		163,336		163,335		326,671		163,349		163,350		326,699		163,524		163,524		327,048
Earnings per share (dollars)
	Basic		2.05		(0.99)		1.06		4.55		(2.28)		2.27		6.96		(3.53)		3.43		8.87		(4.53)		4.34
	Diluted		2.03		(0.98)		1.05		4.52		(2.27)		2.25		6.91		(3.50)		3.41		8.80		(4.49)		4.31
Condensed consolidated comprehensive income under IFRS
Net income			364		9		373		798		(8)		790		1,217		(25)		1,192		1,554		(42)		1,512
Other comprehensive income, net of income taxes
Items that may be subsequently reclassified to net income			(5)		−		(5)		29		−		29		(50)		−		(50)		(40)		−		(40)
Item that will not be subsequently reclassified to net income
	Actuarial gains and losses on employee benefit plans		10		12		22		(33)		25		(8)		118		38		156		53		51		104
Share in the other comprehensive income of associates and joint ventures			(1)		−		(1)		−		−		−		−		−		−		(1)		−		(1)
Comprehensive income			368		21		389		794		17		811		1,285		13		1,298		1,566		9		1,575

(1) The Bank uses certain measures that do not comply with IFRS to assess results. The Bank cautions readers that adjusted measures have no standardized meaning under IFRS and cannot be easily compared with similar measures used by other companies.

3) Condensed Consolidated Balance Sheets 

(unaudited) (millions of Canadian dollars)			Reported as at October 31, 2013		Adjustments		Adjusted as at October 31, 2013			Reported as at October 31, 2012		Adjustments		Adjusted as at November 1, 2012
Assets
	Cash and deposits with financial institutions		3,596		−		3,596			3,249		−		3,249
	Securities		53,744		−		53,744			54,898		−		54,898
	Securities purchased under reverse repurchase agreements
	and securities borrowed		21,449		−		21,449			15,529		−		15,529
	Loans and acceptances		97,338		−		97,338			90,922		−		90,922
	Other		12,077		15		12,092			13,305		−		13,305
			188,204		15		188,219			177,903		−		177,903
Liabilities
	Deposits		101,886		225		102,111			93,249		225		93,474
	Other		74,731		(2)		74,729			73,944		4		73,948
	Subordinated debt		2,426		−		2,426			2,470		−		2,470
			179,043		223		179,266			169,663		229		169,892
Equity
	Equity attributable to the Bank's shareholders
	Preferred shares		677		−		677			762		−		762
	Common shares		2,160		−		2,160			2,054		−		2,054
	Contributed surplus		58		−		58			58		−		58
	Retained earnings		5,034		21		5,055			4,091		−		4,091
	Accumulated other comprehensive income		214		−		214			255		−		255
			8,143		21		8,164			7,220		−		7,220
	Non-controlling interests		1,018		(229)		789			1,020		(229)		791
			9,161		(208)		8,953			8,240		(229)		8,011
			188,204		15		188,219			177,903		−		177,903

 

Caution Regarding Forward-Looking Statements

From time to time, National Bank of Canada (the Bank) makes written and oral forward-looking statements, such as those contained in the Major Economic Trends and the Outlook for National Bank sections of the 2013 Annual Report, in other filings with Canadian securities regulators, and in other communications, for the purpose of describing the economic environment in which the Bank will operate during fiscal 2014 and the objectives it has set for itself for that period. These forward-looking statements are made in accordance with current securities legislation. They include, among others, statements with respect to the economy-particularly the Canadian and U.S. economies-market changes, observations regarding the Bank's objectives and its strategies for achieving them, Bank projected financial returns and certain risks faced by the Bank. These forward-looking statements are typically identified by future or conditional verbs or words such as "outlook," "believe," "anticipate," "estimate," "project," "expect," "intend," "plan," and similar terms and expressions.

By their very nature, such forward-looking statements require assumptions to be made and involve inherent risks and uncertainties, both general and specific. Assumptions about the performance of the Canadian and U.S. economies in 2014 and how that will affect the Bank's business are among the main factors considered in setting the Bank's strategic priorities and objectives and in determining its financial targets, including provisions for credit losses. In determining its expectations for economic growth, both broadly and in the financial services sector in particular, the Bank primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies.

There is a strong possibility that express or implied projections contained in these forward-looking statements will not materialize or will not be accurate. The Bank recommends that readers not place undue reliance on these statements, as a number of factors, many of which are beyond the Bank's control, could cause actual future results, conditions, actions or events to differ significantly from the targets, expectations, estimates or intentions expressed in the forward-looking statements. These factors include strategic risk, credit risk, market risk, liquidity risk, operational risk, regulatory risk, reputation risk, and environmental risk (all of which are described in greater detail in the Risk Management section that begins on page 60 of the 2013 Annual Report); the general economic environment and financial market conditions in Canada, the United States and certain other countries in which the Bank conducts business, including the effects of uncertainty surrounding U.S. government debt negotiations; regulatory changes affecting the Bank's business, capital and liquidity; the situation with respect to the restructured notes of the master asset vehicle (MAV) conduits, in particular the realizable value of underlying assets; changes in the accounting policies the Bank uses to report its financial condition, including uncertainties associated with assumptions and critical accounting estimates; tax laws in the countries in which the Bank operates, primarily Canada and the United States; and changes to capital and liquidity guidelines and to the manner in which they are to be presented and interpreted.

The foregoing list of risk factors is not exhaustive. Additional information about these factors can be found in the Risk Management and Other Risk Factors sections of the 2013 Annual Report. Investors and others who base themselves on the Bank's forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. The Bank also cautions readers not to place undue reliance on these forward-looking statements. The forward-looking information contained in this document is presented for the purpose of interpreting the information contained herein and may not be appropriate for other purposes.

About National Bank of Canada
With $188 billion in assets as at October 31, 2013, National Bank of Canada (nbc.ca), together with its subsidiaries, forms one of Canada's leading integrated financial groups, and was named among the 20 strongest banks in the world by Bloomberg Markets magazine. The Bank has close to 20,000 employees and is widely recognized as a top employer. Its securities are listed on the Toronto Stock Exchange (TSX: NA). Follow the Bank's activities via social media and learn more about its extensive community involvement at clearfacts.ca and commitment.nationalbank.ca.

 

SOURCE: National Bank of Canada

(The telephone numbers provided below are for the exclusive use of journalists, other media representatives and shareholders.):

Ghislain Parent
Chief Financial Officer and
Executive Vice-President
Finance and Treasury
514-394-6807 

Jean Dagenais
Senior Vice-President
Finance, Taxation and
Investor Relations
514-394-6233 

Claude Breton
Assistant Vice-President 
Public Affairs
514-394-8644 

Hélène Baril
Senior Director
Investor Relations
514-394-0296