Regulatory Announcement

National Bank of Canada

November 30, 2022

2022 Annual Financial Statements (Part 1)

National Bank of Canada (the "Bank") announces publication of its 2022 Annual Report, including the audited consolidated financial statements for the years ended 31 October 2022 and 2021, together with the notes thereto and independent auditor's report thereon (the "2022 Financial Statements"). The 2022 Financial Statements have been uploaded to the National Storage Mechanism and will shortly be available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and are available on the Bank's website as part of the 2022 Annual Report at https://www.nbc.ca/en/about-us/investors/investor-relations/annual-reports-proxy-circulars-aif.html.

To view the full PDF of the 2022 Financial Statements, the 2022 Annual Report and the 2022 Annual CEO and CFO Certifications, please click on the following links:

http://www.rns-pdf.londonstockexchange.com/rns/1273I_1-2022-11-30.pdf

Financial Statements

	Management's Responsibility for Financial Reporting	128
	Independent Auditor's Report	129
	Consolidated Balance Sheets	132
	Consolidated Statements of Income	133
	Consolidated Statements of Comprehensive Income	134
	Consolidated Statements of Changes in Equity	136
	Consolidated Statements of Cash Flows	137
Notes to the Audited Consolidated Financial Statements		138

Management's Responsibility for Financial Reporting

The consolidated financial statements of National Bank of Canada (the Bank) have been prepared in accordance with section 308(4) of the Bank Act (Canada), which states that, except as otherwise specified by the Office of the Superintendent of Financial Institutions (Canada) (OSFI), the financial statements are to be prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). IFRS represent Canadian generally accepted accounting principles (GAAP). None of the OSFI accounting requirements are exceptions to IFRS.

Management maintains the accounting and internal control systems needed to discharge its responsibility, which is to provide reasonable assurance that the financial accounts are accurate and complete and that the Bank's assets are adequately safeguarded. Controls that are currently in place include quality standards on staff hiring and training; the implementation of organizational structures with clear divisions of responsibility and accountability for performance; the Code of Professional Conduct; and the communication of operating policies and procedures.

As Chief Executive Officer and as Chief Financial Officer, we have overseen the evaluation of the design and operation of the Bank's internal control over financial reporting in accordance with National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings released by the Canadian Securities Administrators. Based on the evaluation work performed, we have concluded that the internal control over financial reporting and the disclosure controls and procedures were effective as at October 31, 2022 and that they provide reasonable assurance that the Bank's financial information is reliable and that its consolidated financial statements have been prepared in accordance with IFRS.

The Board of Directors (the Board) is responsible for reviewing and approving the financial information contained in the Annual Report. Acting through the Audit Committee, the Board also oversees the presentation of the consolidated financial statements and ensures that accounting and control systems are maintained. Composed of directors who are neither officers nor employees of the Bank, the Audit Committee is responsible, through Internal Audit, for performing an independent and objective review of the Bank's internal control effectiveness, i.e., governance processes, risk management processes and control measures. Furthermore, the Audit Committee reviews the consolidated financial statements and recommends their approval to the Board.

The control systems are further supported by the presence of the Compliance Service, which exercises independent oversight and evaluation in order to assist managers in effectively managing regulatory compliance risk and to obtain reasonable assurance that the Bank is compliant with regulatory requirements.

Both the Senior Vice-President, Internal Audit and the Senior Vice-President, Chief Compliance Officer and Chief Anti-Money Laundering Officer have a direct functional link to the Chair of the Audit Committee and to the Chair of the Risk Management Committee. They both also have direct access to the President and Chief Executive Officer.

In accordance with the Bank Act (Canada), OSFI is mandated to protect the rights and interests of depositors. Accordingly, OSFI examines and enquires into the business and affairs of the Bank, as deemed necessary, to ensure that the provisions of the Bank Act (Canada) are being satisfied and that the Bank is in sound financial condition.

The independent auditor, Deloitte LLP, whose report follows, was appointed by the shareholders at the recommendation of the Board. The auditor has full and unrestricted access to the Audit Committee to discuss audit and financial reporting matters.

Laurent Ferreira

President and Chief Executive Officer

Marie Chantal Gingras

Chief Financial Officer and Executive Vice-President, Finance

Montreal, Canada, November 29, 2022

Independent Auditor's Report

To the Shareholders of National Bank of Canada

Opinion

We have audited the consolidated financial statements of National Bank of Canada (the Bank), which comprise the consolidated balance sheets as at October 31, 2022 and 2021, and the consolidated statements of income, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Bank as at October 31, 2022 and 2021, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards (Canadian GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended October 31, 2022. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Allowances for Credit Losses - Refer to Notes 1 and 7 to the Financial Statements

Key Audit Matter Description

The allowances for credit losses represent management's estimate of expected credit losses (ECL) on financial assets calculated under the IFRS 9 - Financial Instruments ECL framework. The calculation of ECL is based on the probability of default (PD), loss given default (LGD), and exposure at default (EAD) of the underlying assets and represents an unbiased and probability-weighted estimate of losses expected to occur in the future based on forecasts of macroeconomic variables for three scenarios. Lifetime ECL is recorded for financial assets that have experienced significant increases in credit risk (SICR) since initial recognition or that are impaired; otherwise, 12-month ECL is recorded. Given uncertainty surrounding the key inputs used to measure credit losses, the Bank has applied expert credit judgment to adjust the modelled ECL results.

We have identified the allowances for credit losses as a key audit matter due to the inherent complexity of the ECL models used and the significant judgment required by management in relation to the forward-looking nature of some key assumptions, including the impact of a possible recession on the economy. Significant auditor judgment was required in evaluating: (i) the models and methodologies used to measure ECL; (ii) the forecasts of macroeconomic scenarios and their probability weighting; (iii) the determination of SICR; and (iv) the adjustments to the modelled ECL results representing management's expert credit judgment. Auditing the ECL models and the key judgments and assumptions required a high degree of auditor judgment and an increased extent of audit effort, including the involvement of professionals with specialized skills in credit risk and economics.

How the Key Audit Matter Was Addressed in the Audit

Our audit procedures related to the models and the key judgments and assumptions used by management to estimate the ECL included the following, among others:

· With the assistance of professionals with specialized skills in credit risk or economics:

o For a selection of ECL models, evaluated the appropriateness of the models used to estimate ECL;

o Evaluated the forecasts of macroeconomic scenarios and their probability weighting by comparing them against independently developed forecasts and publicly available industry data, including the impact of a possible recession;

o Assessed management's determination of SICR and the appropriateness of the related model's programming;

o Assessed the adjustments to the modelled ECL results by evaluating management's expert credit judgment.

Independent Auditor's Report (cont.)

Income Taxes - Uncertain Tax Positions - Refer to Notes 1 and 24 to the Financial Statements

Key Audit Matter Description

In the normal course of its business, the Bank is involved in a number of transactions for which the tax impacts are uncertain. The Bank accounts for provisions for uncertain tax positions that adequately represent the risk stemming from tax matters under discussion or being audited by tax authorities or from other matters involving uncertainty. These provisions reflect management's best possible estimate of the amounts that may have to be paid based on qualitative assessments of all relevant factors. As disclosed in Note 24, the Bank was reassessed by the tax authorities for additional income taxes and interest in respect of certain Canadian dividends received by the Bank for certain taxation years and may be reassessed for subsequent taxation years in regard to similar activities. The Bank has not recognized any tax liability related to these uncertain tax positions.

We have identified the assessment of the accounting of the uncertain tax positions related to certain Canadian dividends as a key audit matter given the significant judgment made by management when evaluating the probability of acceptance of the Bank's tax positions and when interpreting relevant tax and case law and administrative positions. Auditing these judgments required a high degree of auditor judgment and resulted in an increased extent of audit effort, including the involvement of tax specialists.

How the Key Audit Matter Was Addressed in the Audit

Our audit procedures pertaining to the assessment of the accounting of the uncertain tax positions related to certain Canadian dividends included the following, among others:

· With the assistance of tax specialists, evaluated management's assessment of the probability of acceptance of the Bank's tax positions by assessing:

o The Bank's interpretations of relevant tax and case law and administrative positions;

o The correspondence with the relevant tax authorities; and

o The advice and legal opinions obtained by the Bank's external tax advisors.

Other Information

Management is responsible for the other information. The other information comprises:

· Management's Discussion and Analysis; and

· The information, other than the financial statements and our auditor's report thereon, in the Annual Report.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management's Discussion and Analysis and the Annual Report prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Bank's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Bank's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

· Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank's internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

· Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Bank to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Bank to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Carl Magnan.

/s/ Deloitte LLP¹

November 29, 2022

Montreal, Quebec

¹ CPA auditor, public accountancy permit No. A121501

Consolidated Balance Sheets

As at October 31			2022	2021⁽¹⁾

Assets
Cash and deposits with financial institutions			31,870	33,879

Securities		Notes 3, 4 and 6
At fair value through profit or loss			87,375	84,811
At fair value through other comprehensive income			8,828	9,583
At amortized cost			13,516	11,910
			109,719	106,304

Securities purchased under reverse repurchase agreements
	and securities borrowed		26,486	7,516

Loans		Note 7
Residential mortgage			80,129	72,542
Personal			45,323	41,053
Credit card			2,389	2,150
Business and government			73,317	61,106
			201,158	176,851
Customers' liability under acceptances			6,541	6,836
Allowances for credit losses			(955)	(998)
			206,744	182,689

Other
Derivative financial instruments		Note 16	18,547	16,484
Investments in associates and joint ventures		Note 9	140	225
Premises and equipment		Note 10	1,397	1,216
Goodwill		Note 11	1,519	1,504
Intangible assets		Notes 1 and 11	1,360	1,274
Other assets		Notes 1 and 12	5,958	4,530
			28,921	25,233
			403,740	355,621

Liabilities and equity
Deposits		Notes 4 and 13	266,394	240,938

Other
Acceptances			6,541	6,836
Obligations related to securities sold short			21,817	20,266
Obligations related to securities sold under repurchase agreements
	and securities loaned	Note 8	33,473	17,293
Derivative financial instruments		Note 16	19,632	19,367
Liabilities related to transferred receivables		Notes 4 and 8	26,277	25,170
Other liabilities		Note 14	6,361	6,301
			114,101	95,233
Subordinated debt		Note 15	1,499	768

Equity
Equity attributable to the Bank's shareholders and holders of other equity instruments		Notes 18 and 22
Preferred shares and other equity instruments			3,150	2,650
Common shares			3,196	3,160
Contributed surplus			56	47
Retained earnings		Note 1	15,140	12,854
Accumulated other comprehensive income			202	(32)
			21,744	18,679
Non-controlling interests		Note 19	2	3
			21,746	18,682
			403,740	355,621
The accompanying notes are an integral part of these audited consolidated financial statements.

(1) Certain amounts have been adjusted to reflect an accounting policy change applicable to cloud computing arrangements. For additional information, see Note 1 to these audited consolidated financial statements.

Laurent Ferreira

President and Chief Executive Officer

Karen Kinsley

Director

Consolidated Statements of Income

Year ended October 31			2022	2021⁽¹⁾

Interest income
Loans			7,136	5,460
Securities at fair value through profit or loss			1,548	1,092
Securities at fair value through other comprehensive income			163	181
Securities at amortized cost			263	178
Deposits with financial institutions			435	76
			9,545	6,987
Interest expense
Deposits			3,291	1,635
Liabilities related to transferred receivables			472	372
Subordinated debt			28	17
Other			483	180
			4,274	2,204
Net interest income⁽²⁾			5,271	4,783
Non-interest income
Underwriting and advisory fees			324	415
Securities brokerage commissions			204	238
Mutual fund revenues			587	563
Investment management and trust service fees			997	900
Credit fees			490	506
Card revenues			186	148
Deposit and payment service charges			298	274
Trading revenues (losses)		Note 21	543	268
Gains (losses) on non-trading securities, net			113	151
Insurance revenues, net			158	131
Foreign exchange revenues, other than trading			211	202
Share in the net income of associates and joint ventures		Note 9	28	23
Other			242	325
			4,381	4,144
Total revenues			9,652	8,927
Non-interest expenses
Compensation and employee benefits			3,284	3,027
Occupancy			312	299
Technology		Notes 1, 10 and 11	915	871
Communications			57	53
Professional fees			249	246
Other			413	407
			5,230	4,903
Income before provisions for credit losses and income taxes			4,422	4,024
Provisions for credit losses		Note 7	145	2
Income before income taxes			4,277	4,022
Income taxes		Notes 1 and 24	894	882
Net income		Note 1	3,383	3,140

Net income attributable to
Preferred shareholders and holders of other equity instruments			107	123
Common shareholders		Note 1	3,277	3,017
Bank shareholders and holders of other equity instruments			3,384	3,140
Non-controlling interests			(1)	-
			3,383	3,140

Earnings per share (dollars)		Notes 1 and 25
	Basic		9.72	8.95
	Diluted		9.61	8.85
Dividends per common share (dollars)		Note 18	3.58	2.84
The accompanying notes are an integral part of these audited consolidated financial statements.

(2) Net interest income includes dividend income. For additional information, see Note 1 to these audited consolidated financial statements.

Consolidated Statements of Comprehensive Income

Year ended October 31					2022	2021⁽¹⁾

Net income					3,383	3,140
Other comprehensive income, net of income taxes
	Items that may be subsequently reclassified to net income
		Net foreign currency translation adjustments
			Net unrealized foreign currency translation gains (losses) on investments in foreign operations		471	(314)
			Net foreign currency translation (gains) losses on investments in foreign operations reclassified to net income		-	16
			Impact of hedging net foreign currency translation gains (losses)		(138)	95
					333	(203)
		Net change in debt securities at fair value through other comprehensive income
			Net unrealized gains (losses) on debt securities at fair value through other comprehensive income		(197)	6
			Net (gains) losses on debt securities at fair value through other comprehensive income
				reclassified to net income	91	(34)
			Change in allowances for credit losses on debt securities at fair value through
				other comprehensive income reclassified to net income	1	(2)
					(105)	(30)
		Net change in cash flow hedges
			Net gains (losses) on derivative financial instruments designated as cash flow hedges		(25)	280
			Net (gains) losses on designated derivative financial instruments reclassified to net income		33	26
					8	306
		Share in the other comprehensive income of associates and joint ventures			(2)	-

	Items that will not be subsequently reclassified to net income
		Remeasurements of pension plans and other post-employment benefit plans			(126)	475
		Net gains (losses) on equity securities designated at fair value through other comprehensive income			(27)	64
		Net fair value change attributable to credit risk on financial liabilities designated at
			fair value through profit or loss		601	(12)
					448	527
Total other comprehensive income, net of income taxes					682	600

Comprehensive income					4,065	3,740

Comprehensive income attributable to
	Bank shareholders and holders of other equity instruments				4,066	3,753
	Non-controlling interests				(1)	(13)
					4,065	3,740
The accompanying notes are an integral part of these audited consolidated financial statements.

Consolidated Statements of Comprehensive Income (cont.)

Income Taxes - Other Comprehensive Income

The following table presents the income tax expense or recovery for each component of other comprehensive income.

Year ended October 31				2022	2021
Items that may be subsequently reclassified to net income
	Net foreign currency translation adjustments
		Net unrealized foreign currency translation gains (losses) on investments in foreign operations		(13)	10
		Net foreign currency translation (gains) losses on investments in foreign operations reclassified to net income		-	2
		Impact of hedging net foreign currency translation gains (losses)		(28)	24
				(41)	36
	Net change in debt securities at fair value through other comprehensive income
		Net unrealized gains (losses) on debt securities at fair value through other comprehensive income		(71)	2
		Net (gains) losses on debt securities at fair value through other comprehensive income
			reclassified to net income	32	(12)
		Change in allowances for credit losses on debt securities at fair value through
			other comprehensive income reclassified to net income	-	-
				(39)	(10)
	Net change in cash flow hedges
		Net gains (losses) on derivative financial instruments designated as cash flow hedges		(9)	100
		Net (gains) losses on designated derivative financial instruments reclassified to net income		12	9
				3	109
	Share in the other comprehensive income of associates and joint ventures			-	-
Items that will not be subsequently reclassified to net income
	Remeasurements of pension plans and other post-employment benefit plans			(45)	170
	Net gains (losses) on equity securities designated at fair value through other
		comprehensive income		(10)	24
	Net fair value change attributable to credit risk on financial liabilities designated at
		fair value through profit or loss		216	(5)
				161	189
				84	324
The accompanying notes are an integral part of these audited consolidated financial statements.

Consolidated Statements of Changes in Equity

Year ended October 31			2022	2021⁽¹⁾

Preferred shares and other equity instruments at beginning		Note 18	2,650	2,950
Issuances of preferred shares and other equity instruments			500	500
Redemptions of preferred shares and other equity instruments for cancellation			-	(800)
Preferred shares and other equity instruments at end			3,150	2,650

Common shares at beginning		Note 18	3,160	3,057
Issuances of common shares pursuant to the Stock Option Plan			61	104
Repurchases of common shares for cancellation			(24)	-
Impact of shares purchased or sold for trading			(1)	(1)
Common shares at end			3,196	3,160

Contributed surplus at beginning			47	47
Stock option expense		Note 22	17	11
Stock options exercised			(7)	(11)
Other			(1)	-
Contributed surplus at end			56	47

Retained earnings at beginning			12,854	10,444
Impact of an accounting policy change as at November 1, 2020		Note 1	-	(137)
Net income attributable to the Bank's shareholders and holders of other equity instruments		Note 1	3,384	3,140
Dividends on preferred shares and distributions on other equity instruments		Note 18	(119)	(131)
Dividends on common shares		Note 18	(1,206)	(958)
Premium paid on common shares repurchased for cancellation		Note 18	(221)	-
Issuance expenses for shares and other equity instruments, net of income taxes			(4)	(4)
Remeasurements of pension plans and other post-employment benefit plans			(126)	475
Net gains (losses) on equity securities designated at fair value through other comprehensive income			(27)	64
Net fair value change attributable to the credit risk on financial liabilities designated at fair value
	through profit or loss		601	(12)
Impact of a financial liability resulting from put options written to non-controlling interests		Note 14	(8)	(25)
Other			12	(2)
Retained earnings at end			15,140	12,854

Accumulated other comprehensive income at beginning			(32)	(118)
Net foreign currency translation adjustments			333	(190)
Net change in unrealized gains (losses) on debt securities at fair value through other comprehensive income			(105)	(30)
Net change in gains (losses) on cash flow hedges			8	306
Share in the other comprehensive income of associates and joint ventures			(2)	-
Accumulated other comprehensive income at end			202	(32)

Equity attributable to the Bank's shareholders and holders of other equity instruments			21,744	18,679

Non-controlling interests at beginning		Note 19	3	3
Non-controlling interest from the acquisition of Flinks Technology Inc.		Note 31	-	3
Purchase of the non-controlling interest of the Credigy Ltd. subsidiary			-	10
Net income attributable to non-controlling interests			(1)	-
Other comprehensive income attributable to non-controlling interests			-	(13)
Non-controlling interests at end			2	3

Equity			21,746	18,682

Accumulated Other Comprehensive Income

As at October 31	2022	2021

Accumulated other comprehensive income
Net foreign currency translation adjustments	204	(129)
Net unrealized gains (losses) on debt securities at fair value through other comprehensive income	(34)	71
Net gains (losses) on instruments designated as cash flow hedges	31	23
Share in the other comprehensive income of associates and joint ventures	1	3
	202	(32)
The accompanying notes are an integral part of these audited consolidated financial statements.

Consolidated Statements of Cash Flows

Year ended October 31			2022	2021⁽¹⁾

Cash flows from operating activities
Net income		Note 1	3,383	3,140
Adjustments for
	Provisions for credit losses		145	2
	Depreciation of premises and equipment, including right-of-use assets		202	195
	Amortization of intangible assets	Note 1	279	261
	Impairment losses on premises and equipment and on intangible assets	Notes 10 and 11	8	16
	Gain on remeasurement of the previously held equity interest in Flinks Technology Inc.	Note 31	-	(33)
	Remeasurement at fair value of an investment	Note 6	-	30
	Deferred taxes	Note 1	110	106
	Losses (gains) on sales of non-trading securities, net		(113)	(151)
	Share in the net income of associates and joint ventures		(28)	(23)
	Stock option expense		17	11
Change in operating assets and liabilities
	Securities at fair value through profit or loss		(2,564)	(6,485)
	Securities purchased under reverse repurchase agreements and securities borrowed		(18,970)	6,996
	Loans and acceptances, net of securitization		(23,354)	(15,661)
	Deposits		25,456	25,060
	Obligations related to securities sold short		1,551	3,898
	Obligations related to securities sold under repurchase agreements and securities loaned		16,180	(16,566)
	Derivative financial instruments, net		(1,798)	3,382
	Securitization - Credit cards		(37)	49
	Interest and dividends receivable and interest payable		150	(186)
	Current tax assets and liabilities		(437)	272
	Other items		(2,102)	1,725
			(1,922)	6,038

Cash flows from financing activities
Issuances of preferred shares and other equity instruments			500	500
Redemptions of preferred shares and other equity instruments for cancellation			-	(800)
Issuances of common shares (including the impact of shares purchased for trading)			53	92
Repurchases of common shares for cancellation			(245)	-
Issuance of subordinated debt			739	-
Purchase of the non-controlling interest of the Credigy Ltd. subsidiary			-	(300)
Investment in the Flinks Technology Inc. subsidiary		Note 31	-	(30)
Issuance expenses for shares and other equity instruments			(4)	(4)
Repayments of lease liabilities			(99)	(96)
Dividends paid on shares and distributions on other equity instruments			(1,325)	(1,101)
			(381)	(1,739)

Cash flows from investing activities
Acquisition of Flinks Technology Inc.		Note 31	-	(73)
Net change in investments in associates and joint ventures			202	225
Purchases of non-trading securities			(9,307)	(7,348)
Maturities of non-trading securities			2,050	2,500
Sales of non-trading securities			6,269	6,655
Net change in premises and equipment, excluding right-of-use assets			(296)	(217)
Net change in intangible assets		Note 1	(374)	(275)
			(1,456)	1,467
			-	-
Impact of currency rate movements on cash and cash equivalents			1,750	(1,029)

Increase (decrease) in cash and cash equivalents			(2,009)	4,737
Cash and cash equivalents at beginning			33,879	29,142
Cash and cash equivalents at end⁽²⁾			31,870	33,879

Supplementary information about cash flows from operating activities
Interest paid			3,763	2,261
Interest and dividends received			9,184	6,858
Income taxes paid			1,118	542
The accompanying notes are an integral part of these audited consolidated financial statements.

(2) This item is the equivalent of Consolidated Balance Sheet item Cash and deposits with financial institutions. It includes an amount of $7.7 billion as at October 31, 2022 ($6.8 billion as at October 31, 2021) for which there are restrictions and of which $5.3 billion ($4.9 billion as at October 31, 2021) represent the balances that the Bank must maintain with central banks, other regulatory agencies, and certain counterparties.

Notes to the Audited Consolidated Financial Statements

Note 1	Basis of Presentation and Summary of Significant Accounting Policies	138	Note 18	Share Capital and Other Equity Instruments	199
Note 2	Future Accounting Policy Changes	155	Note 19	Non-Controlling Interests	202
Note 3	Fair Value of Financial Instruments	156	Note 20	Capital Disclosure	203
Note 4	Financial Instruments Designated at Fair Value Through Profit or Loss	167	Note 21	Trading Activity Revenues	204
Note 5	Offsetting Financial Assets and Financial Liabilities	168	Note 22	Share-Based Payments	205
Note 6	Securities	169	Note 23	Employee Benefits - Pension Plans and Other
Note 7	Loans and Allowances for Credit Losses	171		Post-Employment Benefit Plans	208
Note 8	Financial Assets Transferred But Not Derecognized	183	Note 24	Income Taxes	212
Note 9	Investments in Associates and Joint Ventures	184	Note 25	Earnings Per Share	215
Note 10	Premises and Equipment	185	Note 26	Guarantees, Commitments and Contingent Liabilities	215
Note 11	Goodwill and Intangible Assets	186	Note 27	Structured Entities	218
Note 12	Other Assets	188	Note 28	Related Party Disclosures	221
Note 13	Deposits	188	Note 29	Management of the Risks Associated With Financial Instruments	222
Note 14	Other Liabilities	189	Note 30	Segment Disclosures	227
Note 15	Subordinated Debt	189	Note 31	Acquisition	229
Note 16	Derivative Financial Instruments	190	Note 32	Event After the Consolidated Balance Sheet Date	229
Note 17	Hedging Activities	193

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies

National Bank of Canada (the Bank) is a financial institution incorporated and domiciled in Canada and whose shares are listed on the Toronto Stock Exchange. Its head office is located at 600 De La Gauchetière Street West in Montreal, Quebec, Canada. The Bank is a chartered bank under Schedule 1 of the Bank Act (Canada) and is regulated by the Office of the Superintendent of Financial Institutions (Canada) (OSFI). The Bank offers financial services to individuals, businesses, institutional clients, and governments throughout Canada as well as specialized services at the international level. It operates four business segments: the Personal and Commercial segment, the Wealth Management segment, the Financial Markets segment, and the U.S. Specialty Finance and International (USSF&I) segment. Its full line of services includes banking and investing solutions for individuals and businesses, corporate banking and investment banking services, securities brokerage, insurance, and wealth management.

On November 29, 2022, the Board of Directors (the Board) authorized the publication of the Bank's audited annual consolidated financial statements (the consolidated financial statements) for the year ended October 31, 2022.

Basis of Presentation

The Bank's consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). The financial statements also comply with section 308(4) of the Bank Act (Canada), which states that, except as otherwise specified by OSFI, the consolidated financial statements are to be prepared in accordance with IFRS. IFRS represent Canadian generally accepted accounting principles (GAAP). None of the OSFI accounting requirements are exceptions to IFRS. The accounting policies described in the Summary of Significant Accounting Policies section have been applied consistently to all periods presented, except for the change described hereafter in the Accounting Policy Changes section, which were applied retrospectively during the year ended October 31, 2022 as a result of a final agenda decision made by the International Financial Reporting Interpretations Committee (IFRIC) regarding the costs of configuring or customizing a supplier's software application as part of a cloud computing arrangement. To reflect this change in accounting policy, figures from the year ended October 31, 2021 have been adjusted.

Unless otherwise indicated, all amounts are expressed in Canadian dollars, which is the Bank's functional and presentation currency.

Interest Rate Benchmark Reform

The reform of interbank offered rates (IBORs) and other interest rate benchmarks is a global initiative being coordinated and led by central banks and governments around the world, including those in Canada. This reform has been unfolding for several years, with the IASB monitoring developments. To minimize the financial statement impacts arising from replacing current interest rate benchmarks with alternative benchmarks, the IASB amended certain IFRS standards and allowed for some temporary exemptions, notably in the area of hedge accounting.

During fiscal 2022, the Bank transitioned its LIBOR-related (London Interbank Offered Rates) contracts that involve pound sterling (GBP), the euro (EUR), the Japanese yen (JPY), and the Swiss franc (CHF), for which the cessation or loss of representativeness was December 31, 2021. As for USD LIBOR, for which the cessation or loss of representativeness is planned for June 30, 2023, the Bank included rate replacement clauses in contracts negotiated during 2021 and, since January 1, 2022, the Bank has no longer been using USD LIBOR in new contracts except in circumstances compliant with regulatory guidance. On December 16, 2021, the Bank of Canada announced that a white paper published by the Canadian Alternative Reference Rate (CARR) Working Group was recommending that CDOR (Canadian Dollar Offered Rate) be declared unrepresentative by its administrator, namely, Refinitiv Benchmark Services (UK) Limited (Refinitiv) and that CDOR cease to exist as of June 30, 2024 (including a recommendation to cease using CDOR on the derivative financial instrument market as of June 30, 2023).

On January 31, 2022, Refinitiv launched a public consultation on the future of CDOR. The consultation ended on March 2, 2022, after which Refinitiv published an update to the consultation on April 14, 2022. On May 16, 2022, Refinitiv published the consultation conclusions and announced that the publication of CDOR would cease as of June 28, 2024. Following this announcement, the CARR Working Group welcomed Refinitiv's decision and, at the same time, OSFI published its prudential expectations regarding the cessation of CDOR. First, OSFI expects all new derivative contracts and securities to transition to alternative reference rates by June 30, 2023, with no new CDOR exposure being recorded after that date, with limited exceptions for risk mitigation requirements. Thereafter, by June 28, 2024, OSFI expects federally regulated financial institutions to have transitioned all loan agreements referencing CDOR to alternative reference rates.

To prepare for the interest rate benchmark reform, the Bank developed an enterprise-wide project, put together a dedicated team of experts, established a formal governance structure, and prepared a training plan, and several committees were created to ensure the success of the project. The project team is made up of qualified resources from various fields of expertise to ensure a comprehensive analysis of all aspects of the changes as well as the financial, legal, operational, and technological impacts. Many of these experts, who have in-depth knowledge of accounting standards and reform-related activities, are involved in various working groups and participate in meetings with OSFI. The project team regularly reports on the project's progress to the project steering committee and the Financial Markets Risk Committee. As at October 31, 2022, the project was progressing according to schedule. The Bank is exposed to several risks, including interest rate risk and operational risk, which arise from non-derivative financial assets, non-derivative financial liabilities, and derivative financial instruments. The project team ensures that risks are mitigated while ensuring a positive experience for its clients. The Bank is taking all necessary steps to identify, measure, and control all of the risks to ensure a smooth transition throughout the interest rate benchmark reform.

The following table discloses the non-derivative financial assets, non-derivative financial liabilities, and derivative financial instruments subject to the interest rate benchmark reform as at October 31, 2022 that have not yet transitioned to alternative benchmark rates.

	As at October 31, 2022
	CDOR	USD LIBOR
	Maturing after June 28, 2024	Maturing after June 30, 2023
Non-derivative financial assets⁽¹⁾	13,989	5,565
Non-derivative financial liabilities⁽²⁾	11,107	36
Notional amount of derivative financial instruments	379,539	175,489

(1) Non-derivative financial assets include the carrying value of securities as well as the outstanding balances on loans and the customers' liability under acceptances.

(2) Non-derivative financial liabilities include the nominal amounts of deposits and subordinated debt as well as the carrying value of acceptances.

Accounting Policy Changes

Cloud Computing Arrangements - Final Agenda Decision by IFRIC

In April 2021, IFRIC issued a final agenda decision on accounting for the costs of configuring or customizing a supplier's software as part of a cloud computing or SaaS (Software as a Service) arrangement. The main conclusion was that, if the incurred configuration or customization costs do not give rise to an intangible asset that is separate from the software or if the services received are distinct from the software, those costs are expensed as incurred. IFRIC decided that the relevant accounting standards (IAS 38 - Intangible Assets and IFRS 15 - Revenue From Contracts With Customers) contain sufficient guidance and that the conclusions, as indicated in the final agenda decision, are part of the interpretation of IFRS. As such, any change arising from these interpretations must be accounted for as a retrospectively applied accounting policy change in accordance with IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors.

During fiscal 2022, the Bank completed an assessment of the impacts of this change in accounting policy. The change was applied retrospectively and had the following impacts on the consolidated financial statements:

· As at November 1, 2020: A $186 million decrease in Intangible assets, a $49 million increase in Other assets - Deferred tax assets, and a $137 million decrease in Retained earnings;

· As at October 31, 2021: A $50 million decrease in Intangible assets and a $13 million increase in Other assets - Deferred tax assets;

· For the year ended October 31, 2021: A $50 million increase in Non-interest expenses - Technology, a $13 million decrease in Income taxes, a $37 million decrease in Net income and Net income attributable to common shareholders, and a $0.11 decrease in Earnings per share - Basic and diluted.

For the year ended October 31, 2022, the impacts of this accounting policy change on the Consolidated Statement of Income consisted of a $10 million increase in Non-interest expenses - Technology and a $3 million decrease in Income taxes.

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (cont.)

Summary of Significant Accounting Policies

Judgments, Estimates and Assumptions

In preparing consolidated financial statements in accordance with IFRS, management must exercise judgment and make estimates and assumptions that affect the reporting date carrying amounts of assets and liabilities, net income, and related information. Furthermore, certain accounting policies require complex judgments and estimates because they apply to matters that are inherently uncertain, in particular accounting policies applicable to the following: the fair value determination of financial instruments, the impairment of financial assets, the impairment of non-financial assets, pension plans and other post-employment benefits, income taxes, provisions, the consolidation of structured entities, and the classification of debt instruments. Descriptions of these judgments and estimates are provided in each of the notes related thereto in the consolidated financial statements. Actual results could therefore differ from these estimates, in which case the impacts are recognized in the consolidated financial statements of future fiscal periods. The accounting policies described in this note provide greater detail about the use of estimates and assumptions and reliance on judgment.

The effects of the COVID-19 pandemic, the geopolitical context, disrupted supply chains, and rising inflation are persisting and creating uncertainty. Therefore, developing reliable estimates and applying judgment continue to be substantially complex. The uncertainty surrounding certain key inputs used in measuring expected credit losses is described in Note 7 to these consolidated financial statements.

Basis of Consolidation

Subsidiaries

These consolidated financial statements include all the assets, liabilities, operating results and cash flows of the Bank and its subsidiaries, after elimination of intercompany transactions and balances. Subsidiaries are entities, including structured entities, controlled by the Bank. A structured entity is an entity created to accomplish a narrow and well-defined objective and is designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when voting rights relate solely to administrative tasks and the relevant activities are directed by means of contractual arrangements.

Management must exercise judgment in determining whether the Bank must consolidate an entity. The Bank controls an entity only if the following three conditions are met:

· it has decision-making authority regarding the entity's relevant activities;

· it has exposure or rights to variable returns from its involvement with the entity;

· it has the ability to use its power to affect the amount of the returns.

When determining decision-making authority, the Bank considers many factors, including the existence and effect of actual and potential voting rights held by the Bank that can be exercised as well as the holding of instruments that are convertible into voting shares. In addition, the Bank must determine whether, as an investor with decision-making rights, it acts as a principal or agent.

Based on these principles, an assessment of control is performed at the inception of a relationship between any entity and the Bank. When performing this assessment, the Bank considers all facts and circumstances, and it must reassess whether it still controls an investee if facts and circumstances indicate that one or more of the three conditions of control have changed.

The Bank consolidates the entities it controls from the date on which control is obtained and ceases to consolidate them from the date control ceases. The Bank uses the acquisition method to account for the acquisition of a subsidiary from a third party on the date control is obtained.

Non-Controlling Interests

Non-controlling interests in subsidiaries represent the equity interests held by third parties in the Bank's subsidiaries and are presented in total Equity, separately from Equity attributable to the Bank's shareholders and holders of other equity instruments. The non-controlling interests' proportionate shares of the net income and other comprehensive income of the Bank's subsidiaries are presented separately in the Consolidated Statement of Income and in the Consolidated Statement of Comprehensive Income, respectively.

With respect to units issued to third parties by mutual funds and certain other funds that are consolidated, they are presented at fair value in Other liabilities on the Consolidated Balance Sheet. Lastly, changes in ownership interests in subsidiaries that do not result in a loss of control are recognized as equity transactions. The difference between the adjustment in the carrying value of the non-controlling interest and the fair value of the consideration paid or received is recognized directly in Equity attributable to the Bank's shareholders and holders of other equity instruments.

Investments in Associates and Joint Ventures

The Bank exercises significant influence over an entity when it has the power to participate in the financial and operating policy decisions of the investee. The Bank has joint control when there is a contractually agreed sharing of control of an entity, and joint control exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

Investments in associates, i.e., entities over which the Bank exercises significant influence, and investments in joint ventures, i.e., entities over which the Bank has rights to the net assets and exercises joint control, are accounted for using the equity method. Under the equity method, the investment is initially recorded at cost and, following acquisition, the Bank's proportionate shares in the net income and in the other comprehensive income are recognized, respectively, in Non-interest income in the Consolidated Statement of Income and in Other comprehensive income in the Consolidated Statement of Comprehensive Income. The carrying value of the investment is adjusted by an equivalent amount on the Consolidated Balance Sheet and reduced by distributions received.

Translation of Foreign Currencies

The consolidated financial statements are presented in Canadian dollars, which is the Bank's functional and presentation currency. Each foreign operation within the Bank's scope of consolidation determines its own functional currency, and the items reported in the financial statements of each foreign operation are measured using that currency.

Monetary items and non-monetary items measured at fair value and denominated in foreign currencies are translated into the functional currency at exchange rates prevailing at the Consolidated Balance Sheet date. Non-monetary items not measured at fair value are translated into the functional currency at historical rates. Revenues and expenses denominated in foreign currencies are translated at the average exchange rates for the period. Translation gains and losses are recognized in Non-interest income in the Consolidated Statement of Income, except for equity instruments designated at fair value through other comprehensive income, for which unrealized gains and losses are recorded in Other comprehensive income and will not be subsequently reclassified to net income.

In the consolidated financial statements, the assets and liabilities of all foreign operations are translated into the Bank's functional currency at the exchange rates prevailing at the Consolidated Balance Sheet date, whereas the revenues and expenses of such foreign operations are translated into the Bank's functional currency at the average exchange rates for the period. Any goodwill resulting from the acquisition of a foreign operation that does not have the same functional currency as the parent company, and any fair value adjustments to the carrying amounts of assets and liabilities resulting from the acquisition, are treated as assets and liabilities of the foreign operation and translated at the exchange rates prevailing at the Consolidated Balance Sheet date. Unrealized translation gains and losses related to foreign operations, including the impact of hedges and income taxes on the related results, are presented in Other comprehensive income. Upon disposal of a foreign operation, any accumulated translation gains and losses, along with the related hedges, recorded in the Accumulated other comprehensive income item of this foreign operation, are reclassified to Non-interest income in the Consolidated Statement of Income.

Classification and Measurement of Financial Instruments

At initial recognition, all financial instruments are recorded at fair value on the Consolidated Balance Sheet. At initial recognition, financial assets must be classified as subsequently measured at fair value through other comprehensive income, at amortized cost, or at fair value through profit or loss. The Bank determines the classification based on the contractual cash flow characteristics of the financial assets and on the business model it uses to manage these financial assets. At initial recognition, financial liabilities are classified as subsequently measured at amortized cost or as at fair value through profit or loss.

For the purpose of classifying a financial asset, the Bank must determine whether the contractual cash flows associated with the financial asset are solely payments of principal and interest on the principal amount outstanding. The principal is generally the fair value of the financial asset at initial recognition. The interest consists of consideration for the time value of money, for the credit risk associated with the principal amount outstanding during a particular period, and for other basic lending risks and costs as well as of a profit margin. If the Bank determines that the contractual cash flows associated with a financial asset are not solely payments of principal and interest, the financial assets must be classified as measured at fair value through profit or loss.

When classifying financial assets, the Bank determines the business model used for each portfolio of financial assets that are managed together to achieve a same business objective. The business model reflects how the Bank manages its financial assets and the extent to which the financial asset cash flows are generated by the collection of the contractual cash flows, the sale of the financial assets, or both. The Bank determines the business model using scenarios that it reasonably expects to occur. Consequently, the business model determination is a matter of fact and requires the use of judgment and consideration of all the relevant evidence available to the Bank at the date of determination.

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (cont.)

A financial asset portfolio falls within a "hold to collect" business model when the Bank's primary objective is to hold these financial assets in order to collect contractual cash flows from them and not to sell them. When the Bank's objective is achieved both by collecting contractual cash flows and by selling the financial assets, the financial asset portfolio falls within a "hold to collect and sell" business model. In this type of business model, collecting contractual cash flows and selling financial assets are both integral components to achieving the Bank's objective for this financial asset portfolio. Financial assets are mandatorily measured at fair value through profit or loss if they do not fall within either a "hold to collect" business model or a "hold to collect and sell" business model.

Financial Instruments Designated at Fair Value Through Profit or Loss

A financial asset may be irrevocably designated at fair value through profit or loss at initial recognition if certain conditions are met. The Bank may apply this option if, consistent with a documented risk management strategy, doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring financial assets or liabilities or recognizing gains and losses on them on different bases, and if the fair values are reliable. Financial assets thus designated are recognized at fair value, and any change in fair value is recorded in Non-interest income in the Consolidated Statement of Income. Interest income arising from these financial instruments designated at fair value through profit or loss is recorded in Net interest income in the Consolidated Statement of Income.

A financial liability may be irrevocably designated at fair value through profit or loss when it is initially recognized. Financial liabilities thus designated are recognized at fair value, and any changes in fair value attributable to changes in the Bank's own credit risk are recognized in Other comprehensive income unless these changes create or enlarge an accounting mismatch in Net income. Fair value changes not attributable to the Bank's own credit risk are recognized in Non-interest income in the Consolidated Statement of Income. The amounts recognized in Other comprehensive income will not be subsequently reclassified to Net income. Interest expense arising from these financial liabilities designated at fair value through profit or loss is recorded in the Net interest income item of the Consolidated Statement of Income. The Bank may use this option in the following cases:

· if, consistent with a documented risk management strategy, using this option allows the Bank to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise from measuring financial assets or liabilities on different bases, and if the fair values are reliable;

· if a group of financial assets and financial liabilities to which an instrument belongs is managed and its performance is evaluated on a fair value basis, in accordance with the Bank's documented risk management or investment strategy, and information is provided on that basis to senior management. Consequently, the Bank may use this option if it has implemented a documented risk management strategy to manage a group of financial instruments together on the fair value basis, if it can demonstrate that significant financial risks are eliminated or significantly reduced, and if the fair values are reliable;

· for hybrid financial instruments with one or more embedded derivatives that would significantly modify the cash flows of the financial instruments and that would otherwise be bifurcated and accounted for separately.

Financial Instruments Designated at Fair Value Through Other Comprehensive Income

At initial recognition, an investment in an equity instrument that is neither held for trading nor a contingent consideration recognized in a business combination may be irrevocably designated as being at fair value through other comprehensive income. In accordance with this designation, any change in fair value is recognized in Other comprehensive income with no subsequent reclassification to net income. Dividend income is recorded in Interest income in the Consolidated Statement of Income.

Securities Measured at Fair Value Through Other Comprehensive Income

Securities measured at fair value through other comprehensive income include: (i) debt securities for which the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding and that fall within a "hold to collect and sell" business model and (ii) equity securities designated at fair value through other comprehensive income with no subsequent reclassification of gains and losses to net income.

The Bank recognizes securities transactions at fair value through other comprehensive income on the trade date, and the transaction costs are capitalized. Interest income and dividend income are recognized in Interest income in the Consolidated Statement of Income.

Debt Securities Measured at Fair Value Through Other Comprehensive Income

Debt securities measured at fair value through other comprehensive income are recognized at fair value. Unrealized gains and losses are recognized, net of expected credit losses and income taxes, and provided that they are not hedged by derivative financial instruments in a fair value hedging relationship, in Other comprehensive income. When the securities are sold, realized gains or losses, determined on an average cost basis, are reclassified to Non-interest income - Gains (losses) on non-trading securities, net in the Consolidated Statement of Income. Premiums, discounts and related transaction costs are amortized to interest income over the expected life of the instrument using the effective interest rate method.

Equity Securities Designated at Fair Value Through Other Comprehensive Income

Equity securities designated at fair value through other comprehensive income are recognized at fair value. Unrealized gains and losses are presented, net of income taxes, in Other comprehensive income with no subsequent reclassification of realized gains and losses to net income. Transaction costs incurred upon the purchase of such equity securities are not reclassified to net income upon the sale of the securities.

Securities Measured at Amortized Cost

Securities measured at amortized cost include debt securities for which the contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding and that fall within a "hold to collect" business model.

The Bank recognizes these securities transactions at fair value on the trade date, and the transaction costs are capitalized. After initial recognition, debt securities in this category are recorded at amortized cost. Interest income is recognized in Interest income in the Consolidated Statement of Income. Premiums, discounts and related transaction costs are amortized to interest income over the expected life of the instrument using the effective interest rate method. Securities measured at amortized cost are presented net of allowances for credit losses on the Consolidated Balance Sheet.

Securities Measured at Fair Value Through Profit or Loss

Securities not classified or designated as measured at fair value through other comprehensive income or at amortized cost are classified as measured at fair value through profit or loss.

Securities measured at fair value through profit or loss include (i) securities held for trading, (ii) securities designated at fair value through profit or loss, (iii) all equity securities other than those designated as measured at fair value through other comprehensive income with no subsequent reclassifications of gains and losses to net income, and (iv) debt securities for which the contractual cash flows are not solely payments of principal and any interest on any principal amount outstanding.

The Bank recognizes securities transactions at fair value through profit or loss on the settlement date on the Consolidated Balance Sheet. Changes in fair value between the trade date and the settlement date are recognized in Non-interest income in the Consolidated Statement of Income.

Securities at fair value through profit or loss are recognized at fair value. Interest income, any transaction costs, as well as realized and unrealized gains or losses on securities held for trading are recognized in Non-interest income - Trading revenues (losses) in the Consolidated Statement of Income. Dividend income is recorded in Interest income in the Consolidated Statement of Income. Interest income on securities designated at fair value through profit or loss is recorded in Interest income in the Consolidated Statement of Income. Realized and unrealized gains or losses on these securities are recognized in Non-interest income - Trading revenues (losses) in the Consolidated Statement of Income.

Realized and unrealized gains or losses on equity securities at fair value through profit or loss, other than those held for trading, as well as debt securities for which the contractual cash flows are not solely payments of principal and interest on the principal amount outstanding, are recognized in Non-interest income - Gains (losses) on non-trading securities, net in the Consolidated Statement of Income. The dividend income and interest income on these financial assets are recognized in Interest income in the Consolidated Statement of Income.

Securities Purchased Under Reverse Repurchase Agreements, Obligations Related to Securities Sold

Under Repurchase Agreements, and Securities Borrowed and Loaned

The Bank recognizes these transactions at amortized cost using the effective interest rate method, except when they are designated at fair value through profit or loss and are recorded at fair value. These transactions are held within a business model whose objective is to collect contractual cash flows, i.e., cash flows that are solely payments of principal and interest on the principal amount outstanding. Securities sold under repurchase agreements remain on the Consolidated Balance Sheet, whereas securities purchased under reverse repurchase agreements are not recognized. Reverse repurchase agreements and repurchase agreements are treated as collateralized lending and borrowing transactions.

The Bank also borrows and lends securities. Securities loaned remain on the Consolidated Balance Sheet, while securities borrowed are not recognized. As part of these transactions, the Bank pledges or receives collateral in the form of cash or securities. Collateral pledged in the form of securities remains on the Consolidated Balance Sheet. Collateral received in the form of securities is not recognized on the Consolidated Balance Sheet. Collateral pledged or received in the form of cash is recognized in financial assets or liabilities on the Consolidated Balance Sheet.

When the collateral is pledged or received in the form of cash, the interest income and expense are recorded in Net interest income in the Consolidated Statement of Income.

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (cont.)

Loans

Loans Measured at Amortized Cost

Loans classified as measured at amortized cost include loans originated or purchased by the Bank that are not classified as measured at fair value through profit or loss or designated at fair value through profit or loss. These loans are held within a business model whose objective is to collect contractual cash flows, i.e., cash flows that are solely payments of principal and interest on the principal amount outstanding. All loans originated by the Bank are recognized when cash is advanced to a borrower. Purchased loans are recognized when the cash consideration is paid by the Bank.

All loans are initially recognized at fair value plus directly attributable costs and are subsequently measured at amortized cost using the effective interest rate method, net of allowances for expected credit losses. For purchased performing loans, the acquisition date fair value adjustment on each loan is amortized to interest income over the expected remaining life of the loan using the effective interest rate method. For purchased credit-impaired loans, the acquisition date fair value adjustment on each loan consists of management's estimate of the shortfall of principal and interest cash flows that the Bank expects to collect and of the time value of money. The time value of money component of the fair value adjustment is amortized to interest income over the remaining life of the loan using the effective interest rate method. Loans are presented net of allowances for credit losses on the Consolidated Balance Sheet.

Loans Measured at Fair Value Through Profit or Loss

Loans classified as measured at fair value through profit or loss, loans designated at fair value through profit or loss, and loans for which the contractual cash flows are not solely payments of principal and interest on the principal amount outstanding are recognized at fair value on the Consolidated Balance Sheet. The interest income on loans at fair value through profit or loss is recorded in Interest income in the Consolidated Statement of Income.

Changes in the fair value of loans classified as at fair value through profit or loss and loans designated at fair value through profit or loss are recognized in Non-interest income - Trading revenues (losses) in the Consolidated Statement of Income. With respect to loans whose contractual cash flows are not solely payments of principal and interest on the principal amount outstanding, changes in fair value are recognized in Non-interest income - Other in the Consolidated Statement of Income.

Reclassification of Financial Assets

A financial asset, other than a derivative financial instrument or a financial asset that, at initial recognition, was designated as measured at fair value through profit or loss, is reclassified only in rare situations, i.e., when there is a change in the business model used to manage the financial asset. The reclassification is applied prospectively from the reclassification date.

Establishing Fair Value

The fair value of a financial instrument is the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction in the principal market at the measurement date under current market conditions (i.e., an exit price).

Unadjusted quoted prices in active markets, based on bid prices for financial assets and offered prices for financial liabilities, provide the best evidence of fair value. A financial instrument is considered quoted in an active market when prices in exchange, dealer, broker or principal-to-principal markets are accessible at the measurement date. An active market is one where transactions occur with sufficient frequency and volume to provide quoted prices on an ongoing basis.

When there is no quoted price in an active market, the Bank uses another valuation technique that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. The chosen valuation technique incorporates all the factors that market participants would consider when pricing a transaction. Judgment is required when applying a large number of acceptable valuation techniques and estimates to determine fair value. The estimated fair value reflects market conditions on the valuation date and, consequently, may not be indicative of future fair value.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e., the fair value of the consideration received or paid. If there is a difference between the fair value at initial recognition and the transaction price, and the fair value is determined using a valuation technique based on observable market inputs or, in the case of a derivative, if the risks are fully offset by other contracts entered into with third parties, this difference is recognized in the Consolidated Statement of Income. In other cases, the difference between the fair value at initial recognition and the transaction price is deferred on the Consolidated Balance Sheet. The amount of the deferred gain or loss is recognized over the term of the financial instrument. The unamortized balance is immediately recognized in net income when (i) observable market inputs can be obtained and support the fair value of the transaction, (ii) the risks associated with the initial contract are substantially offset by other contracts entered into with third parties, (iii) the gain or loss is realized through a cash receipt or payment, or (iv) the transaction matures or is terminated before maturity.

In certain cases, measurement adjustments are recognized to address factors that market participants would use at the measurement date to determine fair value but that are not included in the measurement techniques due to system limitations or uncertainty surrounding the measure. These factors include, but are not limited to, the unobservable nature of the inputs used in the valuation model, assumptions about risk such as market risk, credit risk, or valuation model risk, and future administration costs. The Bank may also consider market liquidity risk when determining the fair value of financial instruments when it believes these instruments could be disposed of for a consideration that is below the fair value otherwise determined due to a lack of market liquidity or an insufficient volume of transactions in a given market. The measurement adjustments also include the funding valuation adjustment applied to derivative financial instruments to reflect the market implied cost or benefits of funding collateral for uncollateralized or partly collateralized transactions.

As permitted when certain criteria are met, the Bank has elected to determine fair value based on net exposure to credit risk or market risk for certain portfolios of financial instruments, mainly derivative financial instruments.

Impairment of Financial Assets

At the end of each reporting period, the Bank applies a three-stage impairment approach to measure the expected credit losses (ECL) on all debt instruments measured at amortized cost or at fair value through other comprehensive income and on loan commitments and financial guarantees that are not measured at fair value. The ECL model is forward looking. Measurement of ECLs at each reporting period reflects reasonable and supportable information about past events, current conditions, and forecasts of future events and future economic conditions.

Determining the Stage

The ECL three-stage impairment approach is based on the change in the credit quality of financial assets since initial recognition. If, at the reporting date, the credit risk of non-impaired financial instruments has not increased significantly since initial recognition, these financial instruments are classified in Stage 1, and an allowance for credit losses that is measured, at each reporting date, in an amount equal to 12-month expected credit losses, is recorded. When there is a significant increase in credit risk since initial recognition, these non-impaired financial instruments are migrated to Stage 2, and an allowance for credit losses that is measured, at each reporting date, in an amount equal to lifetime expected credit losses, is recorded. In subsequent reporting periods, if the credit risk of a financial instrument improves such that there is no longer a significant increase in credit risk since initial recognition, the ECL model requires reverting to Stage 1, i.e., recognition of 12-month expected credit losses. When one or more events that have a detrimental impact on the estimated future cash flows of a financial asset occurs, the financial asset is considered credit-impaired and is migrated to Stage 3, and an allowance for credit losses equal to lifetime expected credit losses continues to be recorded or the financial asset is written off. Interest income is calculated on the gross carrying amount for financial assets in Stages 1 and 2 and on the net carrying amount for financial assets in Stage 3.

Assessment of Significant Increase in Credit Risk

In determining whether credit risk has increased significantly, the Bank uses an internal credit risk grading system, external risk ratings, and forward-looking information to assess deterioration in the credit quality of a financial instrument. To assess whether or not the credit risk of a financial instrument has increased significantly, the Bank compares the probability of default (PD) occurring over its expected life as at the reporting date with the PD occurring over its expected life on the date of initial recognition and considers reasonable and supportable information indicative of a significant increase in credit risk since initial recognition. The Bank includes relative and absolute thresholds in the definition of significant increase in credit risk and a backstop of 30 days past due. All financial instruments that are 30 days past due are migrated to Stage 2 even if other metrics do not indicate that a significant increase in credit risk has occurred. The assessment of a significant increase in credit risk requires significant judgment.

Measurement of Expected Credit Losses

ECLs are measured as the probability-weighted present value of all expected cash shortfalls over the remaining expected life of the financial instrument, and reasonable and supportable information about past events, current conditions, and forecasts of future events and economic conditions is considered. The estimation and application of forward-looking information requires significant judgment. Cash shortfalls represent the difference between all contractual cash flows owed to the Bank and all cash flows that the Bank expects to receive.

The measurement of ECLs is primarily based on the product of the financial instrument's PD, loss given default (LGD), and exposure at default (EAD). Forward-looking macroeconomic factors such as unemployment rates, housing price indices, interest rates, and gross domestic product (GDP) are incorporated into the risk parameters. The estimate of expected credit losses reflects an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes. The Bank incorporates three forward-looking macroeconomic scenarios in its ECL calculation process: a base scenario, an upside scenario, and a downside scenario. Probability weights are assigned to each scenario. The scenarios and probability weights are reassessed quarterly and subject to management review. The Bank applies experienced credit judgment to adjust the modelled ECL results when it becomes evident that known or expected risk factors and information were not considered in the credit risk rating and modelling process.

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (cont.)

ECLs for all financial instruments are recognized in Provisions for credit losses in the Consolidated Statement of Income. In the case of debt instruments measured at fair value through other comprehensive income, ECLs are recognized in Provisions for credit losses in the Consolidated Statement of Income, and a corresponding amount is recognized in Other comprehensive income with no reduction in the carrying amount of the asset on the Consolidated Balance Sheet. As for debt instruments measured at amortized cost, they are presented net of the related allowances for credit losses on the Consolidated Balance Sheet. Allowances for credit losses for off-balance-sheet credit exposures that are not measured at fair value are included in Other liabilities on the Consolidated Balance Sheet.

Purchased or Originated Credit-Impaired Financial Assets

On initial recognition of a financial asset, the Bank determines whether the asset is credit-impaired. For financial assets that are credit-impaired upon purchase or origination, the lifetime expected credit losses are reflected in the initial fair value. In subsequent reporting periods, the Bank recognizes only the cumulative changes in these lifetime ECLs since initial recognition as an allowance for credit losses. The Bank recognizes changes in ECLs in Provisions for credit losses in the Consolidated Statement of Income, even if the lifetime ECLs are less than the ECLs that were included in the estimated cash flows on initial recognition.

Definition of Default

The definition of default used by the Bank to measure ECLs and transfer financial instruments between stages is consistent with the definition of default used for internal credit risk management purposes. The Bank considers a financial asset, other than a credit card receivable, to be credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred or when contractual payments are 90 days past due. Credit card receivables are considered credit-impaired and are fully written off at the earlier of the following dates: when a notice of bankruptcy is received, a settlement proposal is made, or contractual payments are 180 days past due.

Write-Offs

A financial asset and its related allowance for credit losses are normally written off in whole or in part when the Bank considers the probability of recovery to be non-existent and when all guarantees and other remedies available to the Bank have been exhausted or if the borrower is bankrupt or winding up and balances owing are not likely to be recovered.

Derecognition of Financial Assets and Securitization

A financial asset is considered for derecognition when the Bank has transferred contractual rights to receive the cash flows or assumed an obligation to transfer these cash flows to a third party. The Bank derecognizes a financial asset when it considers that substantially all the risks and rewards of ownership of the asset have been transferred or when the contractual rights to the cash flows of the financial asset expire. When the Bank considers that it has retained substantially all the risks and rewards of ownership of the transferred asset, it continues to recognize the financial asset and, if applicable, recognizes a financial liability on the Consolidated Balance Sheet. If, due to a derivative financial instrument, the transfer of a financial asset does not result in derecognition, the derivative financial instrument is not recognized on the Consolidated Balance Sheet.

When the Bank has neither transferred nor retained substantially all the risks and rewards of ownership of the financial asset, it derecognizes the financial asset it no longer controls. Any rights and obligations retained following the asset transfer are recognized separately as an asset or liability. If the Bank retains control of the financial asset, it continues to recognize the asset to the extent of its continuing involvement in that asset, i.e., the extent to which it is exposed to changes in the value of the transferred asset.

To diversify its funding sources, the Bank participates in two Canada Mortgage and Housing Corporation (CMHC) securitization programs: the Mortgage-Backed Securities Program under the National Housing Act (Canada) (NHA) and Canada Mortgage Bond (CMB) program. Under the first program, the Bank issues NHA securities backed by insured residential mortgages and, under the second, the Bank sells NHA securities to Canada Housing Trust (CHT). As part of these transactions, the Bank retains substantially all the risks and rewards related to ownership of the mortgage loans sold. Therefore, the insured mortgage loans securitized under the CMB program continue to be recognized in the Loans item of the Bank's Consolidated Balance Sheet, and the liabilities for the considerations received from the transfer are recognized in Liabilities related to transferred receivables on the Consolidated Balance Sheet. Moreover, insured mortgage loans securitized and retained by the Bank continue to be recognized in Loans on the Consolidated Balance Sheet.

Derecognition of Financial Liabilities

A financial liability is derecognized when the obligation is discharged, cancelled, or expires. The difference between the carrying value of the financial liability transferred and the consideration paid is recognized in the Consolidated Statement of Income.

Cash and Deposits With Financial Institutions

Cash and deposits with financial institutions consist of cash and cash equivalents, amounts pledged as collateral as well as amounts placed in escrow. Cash and cash equivalents consist of cash, bank notes, deposits with the Bank of Canada and other financial institutions, including net receivables related to cheques, and other items in the clearing process.

Acceptances and Customers' Liability Under Acceptances

The potential liability of the Bank under acceptances is recorded as a customer commitment liability on the Consolidated Balance Sheet. The Bank's potential recourse vis à vis clients is recorded as an equivalent offsetting asset. Fees are recorded in Non-interest income in the Consolidated Statement of Income.

Obligations Related to Securities Sold Short

This financial liability represents the Bank's obligation to deliver the securities it sold but did not own at the time of sale. Obligations related to securities sold short are recorded at fair value and presented as liabilities on the Consolidated Balance Sheet. Realized and unrealized gains and losses are recognized in Non-interest income in the Consolidated Statement of Income.

Derivative Financial Instruments

In the normal course of business, the Bank uses derivative financial instruments to meet the needs of its clients, to generate trading activity revenues, and to manage its exposure to interest rate risk, foreign exchange risk, credit risk, and other market risks.

All derivative financial instruments are measured at fair value on the Consolidated Balance Sheet. Derivative financial instruments with a positive fair value are included in assets, whereas derivative financial instruments with a negative fair value are included in liabilities on the Consolidated Balance Sheet. Where there are offsetting financial assets and financial liabilities, the net fair value of certain derivative financial instruments is reported either as an asset or as a liability, depending on the circumstance.

Embedded Derivative Financial Instruments

An embedded derivative is a component of a hybrid contract that also includes a non-derivative host, the effect being that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided, in the case of a non-financial variable, that the variable is not specific to one of the parties to the contract.

A derivative embedded in a financial liability is separated from the host contract and treated as a separate derivative if, and only if, the following three conditions are met: the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract, the embedded derivative is a separate instrument that meets the definition of a derivative financial instrument, and the hybrid contract is not measured at fair value through profit or loss.

Embedded derivatives that are separately accounted for are measured at fair value on the Consolidated Balance Sheet, and subsequent changes in fair value are recognized in Non-interest income in the Consolidated Statement of Income. In general, all embedded derivatives are presented on a combined basis with the host contract. However, certain embedded derivatives that are separated from the host contract are presented in Derivative financial instruments on the Consolidated Balance Sheet.

Held-for-Trading Derivative Financial Instruments

Derivative financial instruments are recognized at fair value, and the realized and unrealized gains and losses (including interest income and expense) are recorded in Non-interest income in the Consolidated Statement of Income.

Derivative Financial Instruments Designated as Hedging Instruments

Policy

The purpose of a hedging transaction is to modify the Bank's exposure to one or more risks by creating an offset between changes in the fair value of, or the cash flows attributable to, the hedged item and the hedging instrument. Hedge accounting ensures that offsetting gains, losses, revenues and expenses are recognized in the Consolidated Statement of Income in the same period or periods.

Documenting and Assessing Effectiveness

The Bank designates and formally documents each hedging relationship, at its inception, by detailing the risk management objective and the hedging strategy. The documentation identifies the specific asset, liability, or cash flows being hedged, the related hedging instrument, the nature of the specific risk exposure or exposures being hedged, the intended term of the hedging relationship, and the method for assessing the effectiveness or ineffectiveness of the hedging relationship. At the inception of the hedging relationship, and for every financial reporting period for which the hedge has been designated, the Bank ensures that the hedging relationship is highly effective and consistent with its originally documented risk management objective and strategy. When a hedging relationship meets the hedge accounting requirements, it is designated as either a fair value hedge, a cash flow hedge or a foreign exchange hedge of a net investment in a foreign operation.

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (cont.)

Interest Rate Benchmark Reform

A hedging relationship is directly affected by interest rate benchmark reform such as Interbank Offered Rates (IBORs) only if the reform gives rise to uncertainties about (a) the interest rate benchmark (contractually or non-contractually specified) designated as a hedged risk; and/or (b) the timing or the amount of the interest-rate-benchmark-based cash flows of the hedged item or of the hedging instrument.

For such hedging relationships, the following temporary exceptions apply during the period of uncertainty:

• when determining whether a forecast transaction is highly probable or expected to occur, it is assumed that the interest rate benchmark on which the hedged cash flows (contractually or non-contractually specified) are based is not altered as a result of interest rate benchmark reform;

• when assessing whether a hedge is expected to be highly effective, it is assumed that the interest rate benchmark on which the hedged cash flows and/or the hedged risk (contractually or non-contractually specified) are based, or the interest rate benchmark on which the cash flows of the hedging instrument are based, is not altered as a result of interest rate benchmark reform;

• a hedge is not required to be discontinued if the actual results of the hedge are outside an effectiveness range of 80% to 125% as a result of interest rate benchmark reform;

• for a hedge of a non-contractually specified benchmark portion of interest rate risk, the requirement that the designated portion be separately identifiable need only be met at the inception of the hedging relationship.

Fair Value Hedges

For fair value hedges, the Bank mainly uses interest rate swaps to hedge changes in the fair value of a hedged item. The carrying amount of the hedged item is adjusted based on the effective portion of the gains or losses attributable to the hedged risk, which are recognized in the Consolidated Statement of Income, as well as the change in the fair value of the hedging instrument. The resulting ineffective portion is recognized in Non-interest income in the Consolidated Statement of Income.

The Bank prospectively discontinues hedge accounting if the hedging instrument is sold or expires or if the hedging relationship no longer qualifies for hedge accounting or if the Bank revokes the designation. When the designation is revoked, the hedged item is no longer adjusted to reflect changes in fair value, and the amounts previously recorded as cumulative adjustments with respect to the effective portion of gains and losses attributable to the hedged risk are amortized using the effective interest rate method and recognized in the Consolidated Statement of Income over the remaining useful life of the hedged item. If the hedged item is sold or terminated before maturity, the cumulative adjustments with respect to the effective portion of gains and losses attributable to the hedged risk are immediately recorded in the Consolidated Statement of Income.

Cash Flow Hedges

For cash flow hedges, the Bank mainly uses interest rate swaps and total return swaps to hedge variable cash flows attributable to the hedged risk related to a financial asset or liability (or to a group of financial assets or liabilities). The effective portion of changes in fair value of the hedging instrument is recognized in Other comprehensive income, whereas the ineffective portion is recognized in Non-interest income in the Consolidated Statement of Income.

The amounts previously recorded in Accumulated other comprehensive income are reclassified to the Consolidated Statement of Income of the period or periods during which the cash flows of the hedged item affect the Consolidated Statement of Income. If the hedging instrument is sold or expires or if the hedging relationship no longer qualifies for hedge accounting or if the Bank cancels that designation, then the amounts previously recognized in Accumulated other comprehensive income are reclassified to the Consolidated Statement of Income in the period or periods during which the cash flows of the hedged item affect the Consolidated Statement of Income.

Hedges of Net Investments in Foreign Operations

Derivative and non-derivative financial instruments are used to hedge foreign exchange risk related to investments made in foreign operations whose functional currency is not the Canadian dollar. The effective portion of the gains and losses on the hedging instrument is recognized in Other comprehensive income, whereas the ineffective portion is recognized in Non-interest income in the Consolidated Statement of Income. Upon the total or partial sale of a net investment in a foreign operation, amounts reported in Accumulated other comprehensive income are reclassified, in whole or in part, to Non-interest income in the Consolidated Statement of Income.

Offsetting of Financial Assets and Liabilities

Financial assets and liabilities are offset, and the net amount is presented on the Consolidated Balance Sheet when the Bank has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to realize the asset and settle the liability simultaneously.

Premises and Equipment

Premises and equipment, except for land and the head office building under construction, are recognized at cost less accumulated depreciation and accumulated impairment losses, if any. Land and the head office building under construction are recorded at cost less any accumulated impairment losses. Right-of-use assets are presented in Premises and equipment on the Consolidated Balance Sheet. For additional information about the accounting treatment of right-of-use assets, see the Leases section presented below.

Buildings, computer equipment, and equipment and furniture are systematically depreciated over their estimated useful lives. The depreciation period for leasehold improvements is the lesser of the estimated useful life of the leasehold improvements or the non-cancellable period of the lease. Depreciation methods and estimated useful lives are reviewed on an annual basis. The depreciation expense is recorded in Non-interest expenses in the Consolidated Statement of Income.

	Method	Useful life

Buildings	5% declining balance
Computer equipment	Straight-line	3-7 years
Equipment and furniture	Straight-line	8 years
Leasehold improvements	Straight-line	(1)

(1) The depreciation period is the lesser of the estimated useful life or the lease term.

Leases

At the inception date of a contract, the Bank assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. When the Bank is a lessee, it recognizes a right-of-use asset and a corresponding lease liability at the lease commencement date except for short-term leases (defined as leases with terms of 12 months or less) other than real estate leases and leases for which the underlying asset is of low value. For such leases, the Bank recognizes the lease payments as a non-interest expense on a straight-line basis over the lease term. As a practical expedient, the Bank elected, for real estate leases, not to separate non-lease components from lease components and instead account for them as a single lease component. When the Bank is the lessor, the leased assets remain on the Consolidated Balance Sheet and are reported in Premises and equipment, and the rental income is recognized net of related expenses in Non-interest income in the Consolidated Statement of Income.

Right-of-use assets are initially measured at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment losses, if any, and adjusted for certain remeasurements of lease liabilities. The cost of a right-of-use asset comprises the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, any initial direct costs incurred when entering into the lease, and an estimate of costs to dismantle the asset or restore the site, less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lesser of the lease term and the estimated useful life of the asset. Right-of-use assets are presented in Premises and equipment on the Consolidated Balance Sheet. The depreciation expense and impairment losses, if any, are recorded in Non-interest expenses in the Consolidated Statement of Income.

The lease liability is initially measured at the present value of future lease payments net of lease incentives not yet received. The present value of lease payments is determined using the Bank's incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest method. In determining the lease term, the Bank considers all the facts and circumstances that create an economic incentive to exercise an extension option or not to exercise a termination option. The lease term determined by the Bank comprises the non-cancellable period of lease contracts, the periods covered by an option to extend the lease if the Bank is reasonably certain to exercise that option, and the periods covered by an option to terminate the lease if the Bank is reasonably certain not to exercise that option. The Bank reassesses the lease term if a significant event or change in circumstances occurs and that is within its control. The Bank applies judgment to determine the lease term when the lease contains extension and termination options. Lease liabilities are presented in Other liabilities on the Consolidated Balance Sheet, and the interest expense is presented in the Interest expense - Other item of the Consolidated Statement of Income.

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (cont.)

Goodwill

The Bank uses the acquisition method to account for business combinations. The consideration transferred in a business combination is measured at the acquisition-date fair value, and the transaction costs related to the acquisition are expensed as incurred. When the Bank acquires control of a business, all of the identifiable assets and liabilities of the acquiree, including intangible assets, are recorded at fair value. The interests previously held in the acquiree are also measured at fair value. Goodwill represents the excess of the purchase consideration and all previously held interests over the fair value of the identifiable net assets of the acquiree. If the fair value of the identifiable net assets exceeds the purchase consideration and all previously held interests, the difference is immediately recognized in income as a gain on a bargain purchase.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Bank's ownership interest and can be initially measured at either fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets. The measurement basis is selected on a case-by-case basis. Following an acquisition, non-controlling interests consist of the value assigned to those interests at initial recognition plus the non-controlling interests' share of changes in equity since the date of the acquisition.

Intangible Assets

Intangible Assets With Finite Useful Lives

Software that is not part of a cloud computing arrangement and certain other intangible assets are recognized at cost less accumulated amortization and accumulated impairment losses. These intangible assets are systematically amortized on a straight-line basis over their useful lives, which vary between four and ten years. The amortization expense is recorded in Non-interest expenses in the Consolidated Statement of Income.

Intangible Assets With Indefinite Useful Lives

The Bank's intangible assets with indefinite useful lives come from the acquisition of subsidiaries or groups of assets and consist of management contracts and a trademark. They are recognized at the acquisition-date fair value. The management contracts are for the management of open-ended funds. At the end of each reporting period, the Bank reviews the useful lives to determine whether facts and circumstances continue to support an indefinite useful life assessment. Intangible assets are deemed to have an indefinite useful life following an examination of all relevant factors, in particular: (a) the contracts do not have contractual maturities; (b) the stability of the business segment to which the intangible assets belong; (c) the Bank's capacity to control the future economic benefits of the intangible assets; and (d) the continued economic benefits generated by the intangible assets.

Impairment of Non-Financial Assets

Premises and equipment and intangible assets with finite useful lives are tested for impairment when events or changes in circumstances indicate that their carrying value may not be recoverable. At the end of each reporting period, the Bank determines whether there is an indication that premises and equipment or intangible assets with finite useful lives may be impaired. Goodwill and intangible assets that are not available for use or that have indefinite useful lives are tested for impairment annually or more frequently if there is an indication that the asset might be impaired.

An asset is tested for impairment by comparing its carrying amount with its recoverable amount. The recoverable amount must be estimated for the individual asset. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the cash-generating unit (CGU) to which the asset belongs will be determined. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The Bank uses judgment to identify CGUs.

An asset's recoverable amount is the higher of fair value less costs to sell and the value in use of the asset or CGU. Value in use is the present value of expected future cash flows from the asset or CGU. The recoverable amount of the CGU is determined using valuation models that consider various factors such as projected future cash flows, discount rates, and growth rates. The use of different estimates and assumptions in applying the impairment tests could have a significant impact on income.

Corporate assets, such as the head office building and computer equipment, do not generate cash inflows that are largely independent of the cash inflows generated by other assets or groups of assets. Therefore, the recoverable amount of an individual corporate asset cannot be determined unless management has decided to dispose of the asset. However, if there is an indication that a corporate asset may be impaired, the recoverable amount is determined for the CGU or group of CGUs to which the corporate asset belongs, and that recoverable amount is compared with the carrying amount of this CGU or group of CGUs.

Goodwill is always tested for impairment at the level of a CGU or group of CGUs. For impairment testing purposes, from the acquisition date, goodwill resulting from a business combination must be allocated to the CGU or group of CGUs expected to benefit from the synergies of the business combination. Each CGU or group of CGUs to which goodwill is allocated must represent the lowest level for which the goodwill is monitored internally at the Bank and must not be larger than an operating segment. The allocation of goodwill to a CGU or group of CGUs involves management's judgment. If an impairment loss is to be recognized, the Bank does so by first reducing the carrying amount of goodwill allocated to the CGU or group of CGUs and then reducing the carrying amounts of the other assets of the CGU or group of CGUs in proportion to the carrying amount of each asset in the CGU or group of CGUs.

If the recoverable amount of an asset or a CGU is less than its carrying amount, the carrying amount is reduced to its recoverable amount and an impairment loss is recognized in Non-interest expenses in the Consolidated Statement of Income. An impairment loss recognized in prior periods for an asset other than goodwill must be reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment was recognized. If this is the case, the carrying amount of the asset is increased, given that the impairment loss was reversed, but shall not exceed the carrying amount that would have been determined, net of amortization, had no impairment loss been recognized for this asset in previous years.

Provisions

Provisions are liabilities of uncertain timing and amount. A provision is recognized when the Bank has a present obligation (legal or constructive) arising from a past event, when it is probable that an outflow of economic resources will be required to settle the obligation and when the amount of the obligation can be reliably estimated. Provisions are based on the Bank's best estimates of the economic resources required to settle the present obligation, given all relevant risks and uncertainties, and, when it is significant, the effect of the time value of money. Provisions are reviewed at the end of each reporting period. Provisions are presented in Other liabilities on the Consolidated Balance Sheet.

Interest Income and Expense

Interest income and expense, except for the interest income on securities classified as at fair value through profit or loss, are recognized in Net interest income and calculated using the effective interest rate method.

The effective interest rate is the rate that exactly discounts estimated future cash inflows and outflows through the expected life of a financial asset or financial liability to the gross carrying amount of a financial asset or to the amortized cost of a financial liability. When calculating the effective interest rate, the Bank estimates expected cash flows by considering all the contractual terms of the financial instrument but does not consider expected credit losses. The calculation includes all fees and points paid or received between the parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for purchased or originated credit-impaired financial assets and financial assets that were not impaired upon their purchase or origination but became impaired thereafter. For purchased or originated credit-impaired financial assets, the Bank applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition. The credit-adjusted effective interest rate reflects expected credit losses. As for loans that have subsequently become credit-impaired, interest income is calculated by applying the effective interest rate to the net carrying amount (net of allowances for credit losses) rather than to the carrying amount.

Loan origination fees, including commitment, restructuring, and renegotiation fees, are considered an integral part of the yield earned on the loan. They are deferred and amortized using the effective interest rate method, and the amortization is recognized in Interest income over the term of the loan. Direct costs for originating a loan are netted against the loan origination fees. If it is likely that a commitment will result in a loan, commitment fees receive the same accounting treatment, i.e., they are deferred and amortized using the effective interest rate method and the amortization is recognized in Interest income over the term of the loan. Otherwise, they are recorded in Non-interest income over the term of the commitment.

Loan syndication fees are recorded in Non-interest income unless the yield on the loan retained by the Bank is less than that of other comparable lenders involved in the financing. In such cases, an appropriate portion of the fees is deferred and amortized using the effective interest rate method, and the amortization is recognized in Interest income over the term of the loan. Certain mortgage loan prepayment fees are recognized in Interest income in the Consolidated Statement of Income when earned.

Dividend Income

Dividends from an equity instrument are recognized in Net interest income in the Consolidated Statement of Income when the Bank's right to receive payment is established.

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (cont.)

Fee and Commission Income

Fee and commission income is recognized when, or as, a performance obligation is satisfied, i.e., when control of a promised service is transferred to a customer and in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for the service. The revenue may therefore be recognized at a point in time, upon completion of the service, or over time as services are provided.

The Bank must also determine whether its performance obligation is to provide the service itself or to arrange for another party to provide the service (in other words, whether the Bank is acting as a principal or agent). A principal may itself satisfy its performance obligation to provide the specified good or service or it may engage another party to satisfy some or all of the performance obligation on its behalf. A principal also has the primary responsibility for fulfilling the promise to provide the good or service to the customer and has discretion in establishing the price for the service. If the Bank is acting as a principal, revenue is recognized on a gross basis in an amount corresponding to the consideration to which the Bank expects to be entitled. If the Bank is acting as an agent, then revenue is recognized net of the service fees and other costs incurred in relation to the commission and fees earned.

Underwriting and Advisory Fees

Underwriting and advisory fees include underwriting fees, financial advisory fees, and loan syndication fees. These fees are mainly earned in the Financial Markets segment and are recognized at a point in time as revenue upon successful completion of the engagement. Financial advisory fees are fees earned for assisting customers with transactions related to mergers and acquisitions and financial restructurings. Loan syndication fees represent fees earned as the agent or lead lender responsible for structuring, arranging, and administering a loan syndication and are recorded in Non-interest income unless the yield on the loan retained by the Bank is less than that of other comparable lenders involved in the financing. In such cases, an appropriate portion of the fees is deferred and amortized using the effective interest rate method, and the amortization is recognized in Interest income over the term of the loan.

Securities Brokerage Commissions

Securities brokerage commissions are earned in the Wealth Management segment and are recognized when the transaction is executed.

Mutual Fund Revenues

Mutual fund revenues include management fees earned in the Wealth Management segment. Management fees are primarily calculated based on a fund's net asset value and are recorded in the period the services are performed.

Investment Management and Trust Service Fees

Investment management and trust service fees include management fees, trust service fees, and fees for other investment services provided to clients and earned in the Wealth Management segment. Generally, these fees are calculated using the balances of assets under administration and assets under management. Such fees are recognized in the period the service is performed.

Card Revenues

Card revenues are earned in the Personal and Commercial segment and include card fees such as annual and transactional fees as well as interchange fees. Interchange fees are recognized when a card transaction is settled. Card fees are recognized on the transaction date except for annual fees, which are recorded evenly throughout the year. Reward costs are recorded as a reduction to interchange fees.

Credit Fees and Deposit and Payment Service Charges

Credit fees and deposit and payment service charges are earned in the Personal and Commercial, Financial Markets, and U.S. Specialty Finance and International segments. Credit fees include commissions earned by providing services for loan commitments, financial guarantee contracts, bankers' acceptances, and letters of credit and guarantee, and they are generally recognized in income over the period the services are provided. Deposit and payment service charges include fees related to account maintenance activities and transaction-based service charges. Fees related to account maintenance activities are recognized in the period the services are provided, whereas transaction-based service charges are recognized when the transaction is executed.

Insurance Revenues

Insurance contracts, including reinsurance contracts, are arrangements under which one party accepts significant insurance risk by agreeing to compensate the policyholder if a specified uncertain future event was to occur. Gross premiums, net of premiums transferred under reinsurance contracts, are recognized when they become due. Royalties received from reinsurers are recognized when earned. Claims are recognized when received and an amount is estimated as they are being processed. All these amounts are recognized on a net basis in Non-interest income in the Consolidated Statement of Income.

Upon recognition of a premium, a reinsurance asset and insurance liability are recognized, respectively, in Other assets and in Other liabilities on the Consolidated Balance Sheet. Subsequent changes in the carrying values of the reinsurance asset and insurance liability are recognized on a net basis in Non-interest income in the Consolidated Statement of Income.

Income Taxes

Income taxes include current taxes and deferred taxes and are recorded in net income except for income taxes generated by items recognized in Other comprehensive income or directly in equity.

Current tax is the amount of income tax payable on the taxable income for a period. It is calculated using the enacted or substantively enacted tax rates prevailing on the reporting date, and any adjustments recognized in the period for the current tax of prior periods. Current tax assets and liabilities are offset, and the net balance is presented in either Other assets or Other liabilities on the Consolidated Balance Sheet when the Bank has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to simultaneously realize the asset and settle the liability.

Deferred tax is established based on temporary differences between the carrying values and the tax bases of assets and liabilities, in accordance with enacted or substantively enacted income tax laws and rates that will apply on the date the differences reverse. Deferred tax is not recognized for temporary differences related to the following:

· the initial accounting of goodwill;

· the initial accounting of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither accounting income nor taxable income;

· investments in subsidiaries, associates and joint ventures when it is probable that the temporary difference will not reverse in the foreseeable future and that the Bank controls the timing of the reversal of the temporary difference;

· investments in subsidiaries, associates and joint ventures when it is probable that the temporary difference will not reverse in the foreseeable future and that there will not be taxable income to which the temporary difference can be recognized.

Deferred tax assets are tax benefits in the form of deductions that the Bank may claim to reduce its taxable income in future years. At the end of each reporting period, the carrying amount of deferred tax assets is revised, and it is reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow the benefit of the deferred tax asset to be utilized.

Deferred tax assets and liabilities are offset, and the net balance is presented in either Other assets or Other liabilities on the Consolidated Balance Sheet when the Bank has a legally enforceable right to set off the current tax assets and liabilities and if the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on the same taxable entity or on different taxable entities that intend to settle current tax assets and liabilities based on their net amount.

The Bank makes assumptions to estimate income taxes as well as deferred tax assets and liabilities. This process involves estimating the actual amount of current taxes and evaluating tax loss carryforwards and temporary differences arising from differences between the values of items reported for accounting and for income tax purposes. Deferred tax assets and liabilities presented on the Consolidated Balance Sheet are calculated according to the tax rates to be applied in future periods. Previously recorded deferred tax assets and liabilities must be adjusted when the date of the future event is revised based on current information.

The Bank is subject to the jurisdictions of various tax authorities. In the normal course of its business, the Bank is involved in a number of transactions for which the tax impacts are uncertain. As a result, the Bank accounts for provisions for uncertain tax positions that adequately represent the tax risk stemming from tax matters under discussion or being audited by tax authorities or from other matters involving uncertainty. The amounts of these provisions reflect the best possible estimates of the amounts that may have to be paid based on qualitative assessments of all relevant factors. The provisions are estimated at the end of each reporting period. However, it is possible that, at a future date, a provision might need to be adjusted following an audit by the tax authorities. When the final assessment differs from the initially provisioned amounts, the difference will impact the income taxes of the period in which the assessment was made.

Financial Guarantee Contracts

A financial guarantee contract is a contract or indemnification agreement that could require the Bank to make specified payments (in cash, financial instruments, other assets, Bank shares, or provisions of services) to reimburse a beneficiary in the event of a loss resulting from a debtor defaulting on the original or amended terms of a debt instrument.

To reflect the fair value of an obligation assumed at the inception of a financial guarantee, a liability is recorded in Other liabilities on the Consolidated Balance Sheet. After initial recognition, the Bank must measure financial guarantee contracts at the higher of the allowance for credit losses, determined using the ECL model, and of the initially recognized amount less, where applicable, the cumulative amount of revenue recognized. This revenue is recognized in Credit fees in the Consolidated Statement of Income.

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (cont.)

Employee Benefits - Pension Plans and Other Post-Employment Benefit Plans

The Bank offers pension plans that have a defined benefit component and a defined contribution component. The Bank also offers other post-employment benefit plans to eligible employees. The other post-employment benefit plans include post-employment medical, dental, and life insurance coverage. The defined benefit component of the pension plans is funded, whereas the defined contribution component of the pension plans and of the other post-employment benefit plans are not funded.

Defined Benefit Component of the Pension Plans and Other Post-Employment Benefit Plans

Plan expenses and obligations are actuarially determined based on the projected benefit method prorated on service. The calculations incorporate management's best estimates of various actuarial assumptions such as discount rates, rates of compensation increase, health care cost trend rates, mortality rates, and retirement age.

The net asset or net liability related to these plans are calculated separately for each plan as the difference between the present value of the future benefits earned by employees for current and prior-period service and the fair value of plan assets. The net asset or net liability is included in either the Other assets or Other liabilities item of the Consolidated Balance Sheet.

The expense related to these plans consists of the following items: current service cost, net interest on the net plan asset or liability, administration costs, and past service cost, if any, recognized when a plan is amended. This expense is recognized in Compensation and employee benefits in the Consolidated Statement of Income. The net amount of interest income and expense is determined by applying a discount rate to the net plan asset or liability amount.

Remeasurements of defined benefit pension plans and other post-employment benefit plans represent actuarial gains and losses related to the defined benefit obligation and the actual return on plan assets, excluding net interest determined by applying a discount rate to the net plan asset or liability amount. Remeasurements are immediately recognized in Other comprehensive income and are not subsequently reclassified to net income; these cumulative gains and losses are reclassified to Retained earnings.

Defined Contribution Component of the Pension Plans

The expense for these plans is equivalent to the Bank's contributions during the period and is recognized in Compensation and employee benefits in the Consolidated Statement of Income.

Share-Based Payments

The Bank has several share-based compensation plans: the Stock Option Plan, the Stock Appreciation Rights (SAR) Plan, the Deferred Stock Unit (DSU) Plan, the Restricted Stock Unit (RSU) Plan, the Performance Stock Unit (PSU) Plan, the Deferred Compensation Plan (DCP) of National Bank Financial, and the Employee Share Ownership Plan.

Compensation expense is recognized over the service period required for employees to become fully entitled to the award. This period is generally the same as the vesting period, except where the required service period begins before the award date. Compensation expense related to awards granted to employees eligible to retire on the award date is immediately recognized on the award date. Compensation expense related to awards granted to employees who will become eligible to retire during the vesting period is recognized over the period from the award date to the date the employee becomes eligible to retire. For all of these plans, as of the first year of recognition, the expense includes cancellation and forfeiture estimates. These estimates are subsequently revised, as necessary. The Bank uses derivative financial instruments to hedge the risks associated with some of these plans. The compensation expense for these plans, net of related hedges, is recognized in the Consolidated Statement of Income.

Under the Stock Option Plan, the Bank uses the fair value method to account for stock options awarded. The options vest at 25% per year, and each tranche is treated as though it was a separate award. The fair value of each of the tranches is measured on the award date using the Black-Scholes model, and this fair value is recognized in Compensation and employee benefits and Contributed surplus. When the options are exercised, the Contributed surplus amount is credited to Equity - Common shares on the Consolidated Balance Sheet. The proceeds received from the employees when these options are exercised are also credited to Equity - Common shares on the Consolidated Balance Sheet.

SARs are recorded at fair value when awarded, and their fair value is remeasured at the end of each reporting period until they are exercised. The cost is recognized in Compensation and employee benefits in the Consolidated Statement of Income and in Other liabilities on the Consolidated Balance Sheet. The obligation that results from the change in fair value at each period is recognized in net income gradually over the vesting period, and periodically thereafter, until the SARs are exercised. When a SAR is exercised, the Bank makes a cash payment equal to the increase in the stock price since the date of the award.

The obligation that results from the award of a DSU, RSU, PSU and DCP unit is recognized in net income, and the corresponding amount is included in Other liabilities on the Consolidated Balance Sheet. For the DSU, RSU and DCP plans, the change in the obligation attributable to changes in the share price and dividends paid on the common shares of these plans is recognized in Compensation and employee benefits in the Consolidated Statement of Income for the period in which the changes occur. On the redemption date, the Bank makes a cash payment equal to the value of the common shares on that date. For the PSU Plan, the change in the obligation attributable to changes in the share price, adjusted upward or downward depending on the relative result of the performance criteria, and the change in the obligation attributable to dividends paid on the shares awarded under the plan, are recognized in Compensation and employee benefits in the Consolidated Statement of Income for the period in which the changes occur. On the redemption date, the Bank makes a cash payment equal to the value of the common shares on that date, adjusted upward or downward according to the performance criteria.

The Bank's contributions to the employee share ownership plan are expensed as incurred.

Note 2 - Future Accounting Policy Changes

The Bank closely monitors both new accounting standards and amendments to existing accounting standards issued by the IASB. The following standard has been issued but is not yet in effect. The Bank is currently assessing the impacts of applying this standard on the consolidated financial statements.

Effective Date - November 1, 2023

IFRS 17 - Insurance Contracts

In May 2017, the IASB issued IFRS 17 - Insurance Contracts (IFRS 17), a new standard that replaces IFRS 4, the current insurance contract accounting standard. IFRS 17 introduces a new accounting framework that will improve the comparability and quality of financial information. IFRS 17 provides guidance on the recognition, measurement, presentation and disclosure of insurance contracts. IFRS 17 will affect how an entity accounts for its insurance contracts and how it reports financial performance in the consolidated income statement, in particular the timing of revenue recognition for insurance contracts. In June 2020, the IASB issued amendments to IFRS 17 that included a two-year deferral of the effective date along with other changes aimed at addressing concerns and implementation challenges identified after IFRS 17 was published in 2017. IFRS 17, as amended, is to be applied retrospectively for annual periods beginning on or after January 1, 2023. If full retrospective application to a group of insurance contracts is impracticable, the modified retrospective approach or the fair value approach may be used.

To prepare for the application of IFRS 17, the Bank developed a project, set up a specialized team, and established a formal governance structure. It also started executing a detailed plan for the project that defines key activities and the timing of those activities. The project is progressing according to schedule. The Bank is continuing to assess all of the impacts of applying IFRS 17 on its consolidated financial statements as well as on the financial statements of its insurance subsidiary.

Note 3 - Fair Value of Financial Instruments

Fair Value and Carrying Value of Financial Instruments by Category

Financial assets and financial liabilities are recognized on the Consolidated Balance Sheet at fair value or at amortized cost in accordance with the categories set out in the accounting framework for financial instruments.

								As at October 31, 2022
			Carrying value and fair value				Carrying value	Fair value	Total carrying value	Total fair value
			Financial instruments classified as at fair value through profit or loss	Financial instruments designated at fair value through profit or loss	Debt securities classified as at fair value through other comprehensive income	Equity securities designated at fair value through other comprehensive income	Financial instruments at amortized cost, net	Financial instruments at amortized cost, net	Total carrying value	Total fair value

Financial assets
	Cash and deposits with financial
		institutions	-	-	-	-	31,870	31,870	31,870	31,870
									-	-
	Securities		86,338	1,037	8,272	556	13,516	13,007	109,719	109,210

	Securities purchased under reverse
		repurchase agreements
		and securities borrowed	-	-	-	-	26,486	26,486	26,486	26,486

	Loans and acceptances, net of allowances		10,516	-	-	-	196,228	190,955	206,744	201,471

	Other
	Derivative financial instruments		18,547	-	-	-	-	-	18,547	18,547
	Other assets		87	-	-	-	3,221	3,221	3,308	3,308

Financial liabilities
	Deposits⁽¹⁾		-	15,355			251,039	249,937	266,394	265,292

	Other
	Acceptances		-	-			6,541	6,541	6,541	6,541
	Obligations related to securities sold short		21,817	-			-	-	21,817	21,817

	Obligations related to securities sold under
		repurchase agreements and
		securities loaned	-	-			33,473	33,473	33,473	33,473
	Derivative financial instruments		19,632	-			-	-	19,632	19,632
	Liabilities related to transferred receivables		-	11,352			14,925	14,137	26,277	25,489
	Other liabilities		-	-			2,632	2,627	2,632	2,627

	Subordinated debt		-	-			1,499	1,478	1,499	1,478

(1) Includes embedded derivative financial instruments.

								As at October 31, 2021
			Carrying value and fair value				Carrying value	Fair value	Total carrying value	Total fair value
			Financial instruments classified as at fair value through profit or loss	Financial instruments designated at fair value through profit or loss	Debt securities classified as at fair value through other comprehensive income	Equity securities designated at fair value through other comprehensive income	Financial instruments at amortized cost, net	Financial instruments at amortized cost, net	Total carrying value	Total fair value

Financial assets
	Cash and deposits with financial
		institutions	-	-	-	-	33,879	33,879	33,879	33,879

	Securities		83,464	1,347	8,966	617	11,910	11,897	106,304	106,291

	Securities purchased under reverse
		repurchase agreements and
		securities borrowed	-	-	-	-	7,516	7,516	7,516	7,516

	Loans and acceptances, net of allowances		8,539	-	-	-	174,150	173,769	182,689	182,308

	Other
	Derivative financial instruments		16,484	-	-	-	-	-	16,484	16,484
	Other assets		-	-	-	-	2,244	2,244	2,244	2,244

Financial liabilities
	Deposits⁽¹⁾		-	14,018			226,920	227,054	240,938	241,072

	Other
	Acceptances		-	-			6,836	6,836	6,836	6,836
	Obligations related to securities sold short		20,266	-			-	-	20,266	20,266
	Obligations related to securities sold under
		repurchase agreements and
		securities loaned	-	-			17,293	17,293	17,293	17,293
	Derivative financial instruments		19,367	-			-	-	19,367	19,367
	Liabilities related to transferred receivables		-	11,398			13,772	13,724	25,170	25,122
	Other liabilities		-	-			2,101	2,101	2,101	2,101

	Subordinated debt		-	-			768	773	768	773

(1) Includes embedded derivative financial instruments.

Establishing Fair Value

Unadjusted quoted prices in active markets provide the best evidence of fair value. When there is no quoted price in an active market, the Bank applies other valuation techniques that maximize the use of relevant observable inputs and that minimize the use of unobservable inputs. Such valuation techniques include the following: using information available from recent market transactions, referring to the current fair value of a comparable financial instrument, applying discounted cash flow analysis, applying option pricing models, or relying on any other valuation technique that is commonly used by market participants and has proven to yield reliable estimates. Judgment is required when applying many of the valuation techniques. The Bank's valuation was based on its assessment of the conditions prevailing as at October 31, 2022 and may change in the future. Furthermore, there may be measurement uncertainty resulting from the choice of valuation model used.

Note 3 - Fair Value of Financial Instruments (cont.)

Valuation Governance

Fair value is established in accordance with a rigorous control framework. The Bank has policies and procedures that govern the process for determining fair value. These policies are documented and periodically reviewed by the Risk Management Group. All valuation models are validated, and controls have been implemented to ensure that they are applied.

The fair value of existing or new products is determined and validated by functions independent of the risk-taking team. Complex fair value matters are reviewed by valuation committees made up of experts from various specialized functions.

For financial instruments classified in Level 3 of the fair value hierarchy, the Bank has documented the hierarchy classification policies, and controls are in place to ensure that fair value is measured appropriately, reliably, and consistently. Valuation methods and the underlying assumptions are regularly reviewed.

Valuation Methods and Assumptions

Financial Instruments Whose Fair Value Equals Carrying Value

The carrying value of the following financial instruments is a reasonable approximation of fair value:

· cash and deposits with financial institutions;

· securities purchased under reverse repurchase agreements and securities borrowed;

· obligations related to securities sold under repurchase agreements and securities loaned;

· customers' liability under acceptances;

· acceptances;

· certain items of other assets and other liabilities.

Securities and Obligations Related to Securities Sold Short

These financial instruments, except for securities at amortized cost, are recognized at fair value on the Consolidated Balance Sheet. Their fair value is based on quoted prices in active markets, i.e., bid prices for financial assets and offered prices for financial liabilities. If there are no quoted prices in an active market, fair value is estimated using prices for securities that are substantially the same. If such prices are not available, fair value is determined using valuation techniques that incorporate assumptions based primarily on observable market inputs such as current market prices, the contractual prices of the underlying instruments, the time value of money, credit risk, interest rate yield curves, and currency rates.

When one or more significant inputs are not observable in the markets, fair value is established primarily using internal estimates and data that consider the valuation policies in effect at the Bank, economic conditions, the characteristics specific to the financial asset or liability, and other relevant factors.

Securities Issued or Guaranteed by Governments

Securities issued or guaranteed by governments include government debt securities of the governments of Canada (federal, provincial and municipal) as well as debt securities of the U.S. government (U.S. Treasury), of other U.S. agencies, and of other foreign governments. The fair value of these securities is based on unadjusted quoted prices in active markets. For those classified in Level 2, quoted prices for identical or similar instruments in active markets are used to determine fair value. In the absence of an observable market, a valuation technique such as the discounted cash flow method could be used, incorporating assumptions on benchmark yields (CDOR, LIBOR and other) and the risk spreads of similar securities.

Equity Securities and Other Debt Securities

The fair value of equity securities is determined primarily by using quoted prices in active markets. For equity securities and other debt securities classified in Level 2, a valuation technique based on quoted prices of identical and similar instruments in an active market is used to determine fair value. In the absence of observable inputs, a valuation technique such as the discounted cash flow method could be used, incorporating assumptions on benchmark yields (CDOR, LIBOR and other) and the risk spreads of similar securities. For those classified in Level 3, fair value can be determined based on net asset value, which represents the estimated value of a security based on valuations received from investment or fund managers or the general partners of limited partnerships. Fair value can also be determined using internal valuation techniques adjusted to reflect financial instrument risk factors and economic conditions.

Derivative Financial Instruments

Derivative financial instruments are recorded at fair value on the Consolidated Balance Sheet. For exchange-traded derivative financial instruments, fair value is based on quoted prices in an active market.

For over-the-counter (OTC) derivative financial instruments, fair value is determined using well established valuation techniques that incorporate assumptions based primarily on observable market inputs such as current market prices and the contractual prices of the underlying instruments, the time value of money, interest rate yield curves, credit curves, currency rates as well as price and rate volatility factors. In establishing the fair value of OTC derivative financial instruments, the Bank also incorporates the following factors:

Credit Valuation Adjustment (CVA)

The CVA is a valuation adjustment applied to derivative financial instruments to reflect the credit risk of the counterparty. For each counterparty, the CVA is based on the expected positive exposure and probabilities of default through time. The exposures are determined by using relevant factors such as current and potential future market values, master netting agreements, collateral agreements, and expected recovery rates. The default probabilities are inferred using credit default swap (CDS) spreads. When such information is unavailable, relevant proxies are used. While the general methodology currently assumes independence between expected positive exposures and probabilities of default, adjustments are applied to certain types of transactions where there is a direct link between the exposure at default and the default probabilities.

Funding Valuation Adjustment (FVA)

The FVA is a valuation adjustment applied to derivative financial instruments to reflect the market-implied cost or benefits of funding collateral for uncollateralized or partly collateralized transactions. The expected exposures are determined using methodologies consistent with the CVA framework. The funding level used to determine the FVA is based on the average funding level of relevant market participants.

When the valuation techniques incorporate one or more significant inputs that are not observable in the markets, the fair value of OTC derivative financial instruments is established primarily on the basis of internal estimates and data that consider the valuation policies in effect at the Bank, economic conditions, the characteristics specific to the financial asset or financial liability, and other relevant factors.

Loans

The fair value of fixed-rate mortgage loans is determined by discounting expected future contractual cash flows, adjusted for several factors, including prepayment options, current market interest rates for similar loans, and other relevant variables where applicable. The fair value of variable-rate mortgage loans is deemed to equal carrying value.

The fair value of other fixed-rate loans is determined by discounting expected future contractual cash flows using current market interest rates charged for similar new loans. The fair value of other variable-rate loans is deemed to equal carrying value.

Deposits

The fair value of fixed-term deposits is determined primarily by discounting expected future contractual cash flows and considering several factors such as redemption options and market interest rates currently offered for financial instruments with similar conditions. For certain term funding instruments, fair value is determined using market prices for similar instruments. The fair value of demand deposits and notice deposits is deemed to equal carrying value.

The fair value of structured deposit notes is established using valuation models that maximize the use of observable inputs when available, such as benchmark indices, and also incorporates the Bank's own credit risk. In calculating the Bank's own credit risk, the market implied spreads of the Bank are used to infer its probabilities of default. Lastly, when fair value is determined using option pricing models, the valuation techniques are similar to those described for derivative financial instruments.

Liabilities Related to Transferred Receivables

These liabilities arise from sale transactions to Canada Housing Trust (CHT) of securities backed by insured residential mortgages and other securities under the Canada Mortgage Bond (CMB) program. These transactions do not qualify for derecognition. They are recorded as guaranteed borrowings, which results in the recording of liabilities on the Consolidated Balance Sheet. The fair value of these liabilities is established using valuation techniques based on observable market inputs such as Canada Mortgage Bond prices.

Note 3 - Fair Value of Financial Instruments (cont.)

Other Liabilities and Subordinated Debt

The fair value of these financial liabilities is based on quoted market prices in an active market. If there is no active market, fair value is determined by discounting contractual cash flows using the current market interest rates offered for similar financial instruments that have the same term to maturity.

Hierarchy of Fair Value Measurements

Determining the Levels of the Fair Value Measurement Hierarchy

IFRS establishes a fair value measurement hierarchy that classifies the inputs used in financial instrument fair value measurement techniques according to three levels. This fair value hierarchy requires observable market inputs to be used whenever such inputs exist. According to the hierarchy, the highest level of inputs are unadjusted quoted prices in active markets for identical instruments and the lowest level of inputs are unobservable inputs. If inputs from different levels of the hierarchy are used, the financial instrument is classified in the same level as the lowest level input that is significant to the fair value measurement. The fair value measurement hierarchy has the following levels:

Level 1

Inputs corresponding to unadjusted quoted prices in active markets for identical assets and liabilities and accessible to the Bank at the measurement date. These instruments consist primarily of equity securities, derivative financial instruments traded in active markets, and certain highly liquid debt securities actively traded in over-the-counter markets.

Level 2

Valuation techniques based on inputs, other than the quoted prices included in Level 1 inputs, that are directly or indirectly observable in the market for the asset or liability. These inputs are quoted prices of similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation model that are observable for that instrument; and inputs that are derived principally from or corroborated by observable market inputs by correlation or other means. These instruments consist primarily of certain loans, certain deposits, derivative financial instruments traded in over-the-counter markets, certain debt securities, certain equity securities whose value is not directly observable in an active market, liabilities related to transferred receivables, and certain other liabilities.

Level 3

Valuation techniques based on one or more significant inputs that are not observable in the market for the asset or liability. The Bank classifies financial instruments in Level 3 when the valuation technique is based on at least one significant input that is not observable in the markets. The valuation technique may also be partly based on observable market inputs.

Financial instruments whose fair values are classified in Level 3 consist of the following:

· financial instruments measured at fair value through profit or loss: investments in hedge funds for which there are certain restrictions on unit or security redemptions, equity securities and debt securities of private companies, as well as certain derivative financial instruments whose fair value is established using internal valuation models that are based on significant unobservable market inputs;

· securities at fair value through other comprehensive income: equity and debt securities of private companies;

· certain loans and certain deposits (structured deposit notes) whose fair value is established using internal valuation models that are based on significant unobservable market inputs;

· certain other assets for which fair value is established using internal valuation models that are based on significant unobservable market inputs.

Transfers Between the Fair Value Hierarchy Levels

Transfers of financial instruments between Levels 1 and 2 and transfers to (or from) Level 3 are deemed to have taken place at the beginning of the quarter in which the transfer occurred. Significant transfers can occur between the fair value hierarchy levels due to new information on inputs used to determine fair value and the observable nature of those inputs.

During fiscal 2022, $41 million in securities classified as at fair value through profit or loss and $3 million in obligations related to securities sold short were transferred from Level 2 to Level 1 as a result of changing market conditions ($31 million in securities classified as at fair value through profit or loss and $2 million in obligations related to securities sold short in fiscal 2021). In addition, during fiscal 2022, $26 million in securities classified as at fair value through profit or loss and $2 million in obligations related to securities sold short were transferred from Level 1 to Level 2 as a result of changing market conditions (for fiscal 2021, $30 million in securities classified as at fair value through profit or loss).

During fiscal years 2022 and 2021, financial instruments were transferred to (or from) Level 3 due to changes in the availability of observable market inputs as a result of changing market conditions.

Financial Instruments Recorded at Fair Value on the Consolidated Balance Sheet

The following tables show financial instruments recorded at fair value on the Consolidated Balance Sheet according to the fair value hierarchy.

						As at October 31, 2022
					Level 1	Level 2	Level 3	Total financial assets/liabilities at fair value

Financial assets
	Securities
		At fair value through profit or loss
			Securities issued or guaranteed by
				Canadian government	4,736	8,186	-	12,922
				Canadian provincial and municipal governments	-	9,260	-	9,260
				U.S. Treasury, other U.S. agencies and other foreign governments	10,639	4,445	-	15,084
			Other debt securities		-	3,324	60	3,384
			Equity securities		45,805	504	416	46,725
					61,180	25,719	476	87,375
		At fair value through other comprehensive income
			Securities issued or guaranteed by
				Canadian government	21	3,191	-	3,212
				Canadian provincial and municipal governments	-	1,970	-	1,970
				U.S. Treasury, other U.S. agencies and other foreign governments	1,687	191	-	1,878
			Other debt securities		-	1,212	-	1,212
			Equity securities		-	236	320	556
					1,708	6,800	320	8,828

	Loans				-	10,272	244	10,516

	Other
		Derivative financial instruments			342	18,204	1	18,547
		Other assets - Other items			-	-	87	87
					63,230	60,995	1,128	125,353

Financial liabilities
	Deposits				-	15,424	8	15,432

	Other
		Obligations related to securities sold short			15,213	6,604	-	21,817
		Derivative financial instruments			625	18,989	18	19,632
		Liabilities related to transferred receivables			-	11,352	-	11,352
					15,838	52,369	26	68,233

Note 3 - Fair Value of Financial Instruments (cont.)

						As at October 31, 2021
					Level 1	Level 2	Level 3	Total financial assets/liabilities at fair value

Financial assets
	Securities
		At fair value through profit or loss
			Securities issued or guaranteed by
				Canadian government	2,661	6,716	-	9,377
				Canadian provincial and municipal governments	-	8,998	-	8,998
				U.S. Treasury, other U.S. agencies and other foreign governments	2,547	1,878	-	4,425
			Other debt securities		-	2,484	47	2,531
			Equity securities		58,539	517	424	59,480
					63,747	20,593	471	84,811
		At fair value through other comprehensive income
			Securities issued or guaranteed by
				Canadian government	19	4,214	-	4,233
				Canadian provincial and municipal governments	-	2,313	-	2,313
				U.S. Treasury, other U.S. agencies and other foreign governments	1,384	252	-	1,636
			Other debt securities		-	784	-	784
			Equity securities		-	311	306	617
					1,403	7,874	306	9,583

	Loans				-	8,242	297	8,539

	Other
		Derivative financial instruments			203	16,278	3	16,484
					65,353	52,987	1,077	119,417

Financial liabilities
	Deposits				-	14,215	-	14,215

	Other
		Obligations related to securities sold short			15,546	4,720	-	20,266
		Derivative financial instruments			693	18,673	1	19,367
		Liabilities related to transferred receivables			-	11,398	-	11,398
					16,239	49,006	1	65,246

Financial Instruments Classified in Level 3

The Bank classifies financial instruments in Level 3 when the valuation technique is based on at least one significant input that is not observable in the markets. The valuation technique may also be based, in part, on observable market inputs. The following table shows the significant unobservable inputs used for the fair value measurements of financial instruments classified in Level 3 of the hierarchy.

							As at October 31, 2022
				Fair value	Primary valuation techniques	Significant unobservable inputs	Range of input values
							Low				High
Financial assets
	Securities

		Equity securities and other debt securities		796	Net asset value	Net asset value	100		%		100		%
					Market comparable	EV/EBITDA⁽¹⁾ multiple	18		x		21		x
					Discounted cash flows	Discount rate	4.50		%		19.00		%
	Loans
		Loans at fair value through profit or loss		244	Discounted cash flows	Discount rate	7.06		%		15.09		%
					Discounted cash flows	Liquidity premium	2.62		%		10.49		%
	Other
		Derivative financial instruments
			Equity contracts	1	Option pricing model	Long-term volatility	21		%		54		%
						Market correlation	38		%		95		%
		Other assets - Other items		87	Discounted cash flows	Discount rate	9		%		9		%
				1,128
Financial liabilities
	Deposits
		Structured deposit notes⁽²⁾		8	Option pricing model	Long-term volatility	10		%		35		%
						Market correlation	(3)		%		94		%
	Other
		Derivative financial instruments
			Interest rate contracts	8	Discounted cash flows	Discount rate	2.20		%		2.20		%
			Equity contracts	10	Option pricing model	Long-term volatility	9		%		51		%
						Market correlation	1		%		95		%
				26


								As at October 31, 2021
				Fair value	Primary valuation techniques	Significant unobservable inputs		Range of input values
								Low				High
Financial assets
	Securities

		Equity securities and other debt securities		777	Net asset value	Net asset value		100		%		100		%
					Market comparable	EV/EBITDA⁽¹⁾ multiple		18		x		20		x
					Discounted cash flows	Credit spread		560		Bps⁽³⁾		560		Bps⁽³⁾
					Discounted cash flows	Discount rate		4.50		%		19.00		%
Loans
		Loans at fair value through profit or loss		297	Discounted cash flows	Discount rate		3.25		%		7.09		%
					Discounted cash flows	Liquidity premium		1.98		%		6.27		%
	Other
		Derivative financial instruments
			Interest rate contracts	3	Discounted cash flows	Discount rate		2.20		%		2.20		%
				1,077
Financial liabilities
	Other
		Derivative financial instruments
			Equity contracts	1	Option pricing model	Long-term volatility		6		%		86		%
						Market correlation		(5)		%		90		%
				1

(1) EV/EBITDA means Enterprise Value/Earnings Before Interest, Taxes, Depreciation and Amortization.

(2) Includes embedded derivative financial instruments.

(3) Bps or basis point is a unit of measure equal to 0.01%.

Note 3 - Fair Value of Financial Instruments (cont.)

Significant Unobservable Inputs Used for Fair Value Measurements of Financial Instruments Classified in Level 3

Net Asset Value

Net asset value is the estimated value of a security based on valuations received from the investment or fund managers, the administrators of the conduits, or the general partners of limited partnerships. The net asset value of a fund is the total fair value of assets less liabilities.

EV/EBITDA (Enterprise Value/Earnings Before Interest, Taxes, Depreciation and Amortization) Multiple and Price Equivalent

Private equity valuation inputs include earnings multiples, which are determined based on comparable companies, and a higher multiple will translate into a higher fair value. Price equivalent is a percentage of the market price based on the liquidity of the security.

Discount Rate

The discount rate is the input used to bring future cash flows to their present value. A higher discount rate will translate into a lower fair value.

Liquidity Premium

A liquidity premium may be applied when few or no transactions exist to support the valuations. A higher liquidity premium will result in a lower value.

Long-Term Volatility

Volatility is a measure of the expected future variability of market prices. Volatility is generally observable in the market through options prices. However, the long-term volatility of options with a longer maturity might not be observable. An increase (decrease) in long-term volatility is generally associated with an increase (decrease) in long-term correlation. Higher long-term volatility may increase or decrease an instrument's fair value depending on its terms.

Market Correlation

Correlation is a measure of the inter-relationship between two different variables. A positive correlation means that the variables tend to move in the same direction; a negative correlation means that the variables tend to move in opposite directions. Correlation is used to measure financial instruments whose future returns depend on several variables. Changes in correlation will either increase or decrease a financial instrument's fair value depending on the terms of its contractual payout.

Credit Spread

A credit spread (yield) is the difference between the instrument's yield and a benchmark yield. Benchmark instruments have high credit quality ratings with similar maturities. The credit spread therefore represents the discount rate used to determine the present value of future cash flows of an asset to reflect the market return required for credit quality in the estimated cash flows. A higher credit spread will result in a lower value.

Sensitivity Analysis of Financial Instruments Classified in Level 3

The Bank performs sensitivity analyses for the fair value measurements of Level 3 financial instruments, substituting unobservable inputs with one or more reasonably possible alternative assumptions.

For equity securities and other debt securities, the Bank varies significant unobservable inputs such as net asset values, EV/EBITDA multiples, or price equivalents and establishes a reasonable fair value range that could result in a $126 million increase or decrease in the fair value recorded as at October 31, 2022 (a $115 million increase or decrease as at October 31, 2021).

For loans, the Bank varies unobservable inputs such as a liquidity premium and establishes a reasonable fair value range that could result in a $31 million increase or decrease in the fair value recorded as at October 31, 2022 (a $28 million increase or decrease as at October 31, 2021).

For derivative financial instruments and embedded derivative financial instruments related to structured deposit notes, the Bank varies long-term volatility and market correlation inputs and establishes a reasonable fair value range. As at October 31, 2022, for derivative financial instruments, the net fair value could result in a $5 million increase or decrease (a $1 million increase or decrease as at October 31, 2021), whereas for structured deposit notes, the net fair value could result in a $1 million increase or decrease (no sensitivity analysis as at October 31, 2021 since there were no structured deposit notes classified in Level 3).

For other assets, the Bank varies unobservable inputs such as discount rates and establishes a reasonable fair value range that could result in a $10 million increase or decrease in the fair value recorded as at October 31, 2022 (no sensitivity analysis as at October 31, 2021 since there were no other assets classified in Level 3).

For all Level 3 financial instruments, the reasonable fair value ranges could result in a 5% increase or decrease in net income as at October 31, 2022 (a 5% increase or decrease in net income as at October 31, 2021).

Change in the Fair Value of Financial Instruments Classified in Level 3

The Bank may hedge the fair value of financial instruments classified in the various levels through offsetting hedge positions. Gains and losses for financial instruments classified in Level 3 presented in the following tables do not reflect the inverse gains and losses on financial instruments used for economic hedging purposes that may have been classified in Level 1 or 2 by the Bank. In addition, the Bank may hedge the fair value of financial instruments classified in Level 3 using other financial instruments classified in Level 3. The effect of these hedges is not included in the net amount presented in the following tables. The gains and losses presented hereafter may comprise changes in fair value based on observable and unobservable inputs.

					Year ended October 31, 2022
		Securities at fair value through profit or loss	Securities at fair value through other comprehensive income	Loans and other assets	Derivative financial instruments⁽¹⁾	Deposits⁽²⁾
Fair value as at October 31, 2021		471	306	297	2	-
Total realized and unrealized gains (losses) included in Net income ⁽³⁾		21	-	(50)	(19)	3
Total realized and unrealized gains (losses) included in
	Other comprehensive income	-	7	-	-	-
Purchases		60	7	71	-	-
Sales		(64)	-	-	-	-
Issuances		-	-	22	-	(3)
Settlements and other		-	-	(9)	(1)	-
Financial instruments transferred into Level 3		-	-	-	1	(8)
Financial instruments transferred out of Level 3		(12)	-	-	-	-
Fair value as at October 31, 2022		476	320	331	(17)	(8)
Change in unrealized gains and losses included in Net income with respect
	to financial assets and financial liabilities held as at October 31, 2022⁽⁴⁾	3	-	(50)	(19)	3

					Year ended October 31, 2021
		Securities at fair value through profit or loss	Securities at fair value through other comprehensive income	Loans and other assets	Derivative financial instruments⁽¹⁾	Deposits⁽²⁾
Fair value as at October 31, 2020		457	373	372	29	2
Total realized and unrealized gains (losses) included in Net income ⁽⁵⁾		13	-	24	(28)	-
Total realized and unrealized gains (losses) included in
	Other comprehensive income	-	(10)	-	-	-
Purchases		43	-	-	-	-
Sales		(42)	(113)	-	-	-
Issuances		-	-	12	-	-
Settlements and other⁽⁶⁾		-	56	(111)	(1)	-
Financial instruments transferred into Level 3		-	-	-	(1)	-
Financial instruments transferred out of Level 3		-	-	-	3	(2)
Fair value as at October 31, 2021		471	306	297	2	-
Change in unrealized gains and losses included in Net income with respect
	to financial assets and financial liabilities held as at October 31, 2021⁽⁷⁾	14	-	24	(28)	-

(1) The derivative financial instruments include assets and liabilities presented on a net basis.

(2) The amounts include the fair value of embedded derivative financial instruments in deposits.

(3) Total gains (losses) included in Non-interest income was a loss of $45 million.

(4) Total unrealized gains (losses) included in Non-interest income was an unrealized loss of $63 million.

(5) Total gains (losses) included in Non-interest income was a gain of $9 million.

(6) On October 31, 2021, the Bank concluded that it had lost significant influence over AfrAsia Bank Limited (AfrAsia) and therefore ceased using the equity method to account for this investment. The Bank designated its investment in AfrAsia as a financial asset measured at fair value through other comprehensive income in an amount of $56 million.

(7) Total unrealized gains (losses) included in Non-interest income was an unrealized gain of $10 million.

Note 3 - Fair Value of Financial Instruments (cont.)

Financial Instruments Not Recorded at Fair Value on the Consolidated Balance Sheet

The following tables show the financial instruments that have not been recorded at fair value on the Consolidated Balance Sheet according to the fair value hierarchy, except for those whose carrying value is a reasonable approximation of fair value.

							As at October 31, 2022
					Level 1		Level 2		Level 3		Total

Financial assets
	Securities at amortized cost
		Securities issued or guaranteed by
			Canadian government		-		5,439		-		5,439
			Canadian provincial and municipal governments		-		1,708		-		1,708
			U.S. Treasury, other U.S. agencies and other foreign governments		-		140		-		140
		Other debt securities			-		5,720		-		5,720
					-		13,007		-		13,007
	Loans, net of allowances				-		81,828		102,640		184,468

Financial liabilities
	Deposits				-		249,937		-		249,937
	Other
		Liabilities related to transferred receivables			-		14,137		-		14,137
		Other liabilities			-		73		-		73
	Subordinated debt				-		1,478		-		1,478
					-		265,625		-		265,625

						As at October 31, 2021
				Level 1		Level 2		Level 3		Total

Financial assets
	Securities at amortized cost
		Securities issued or guaranteed by
			Canadian government	-		5,793		-		5,793
			Canadian provincial and municipal governments	-		2,227		-		2,227
			U.S. Treasury, other U.S. agencies and other foreign governments	-		-		-		-
		Other debt securities		-		3,877		-		3,877
				-		11,897		-		11,897
	Loans, net of allowances			-		67,149		99,872		167,021

Financial liabilities
	Deposits			-		227,054		-		227,054

	Other
		Liabilities related to transferred receivables		-		13,724		-		13,724
		Other liabilities		-		114		-		114
	Subordinated debt			-		773		-		773
				-		241,665		-		241,665

Note 4 - Financial Instruments Designated at Fair Value Through Profit or Loss

The Bank chose to designate certain financial instruments at fair value through profit or loss according to the criteria presented in Note 1 to these consolidated financial statements. Consistent with its risk management strategy and in accordance with the fair value option, which permits the designation if it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring financial assets and liabilities or recognizing the gains and losses thereon on different bases, the Bank designated certain securities and certain liabilities related to transferred receivables at fair value through profit or loss. The fair value of liabilities related to transferred receivables does not include credit risk, as the holders of these liabilities are not exposed to the Bank's credit risk. The Bank also designated certain deposits that include embedded derivative financial instruments at fair value through profit or loss.

To determine a change in fair value arising from a change in the credit risk of deposits designated at fair value through profit or loss, the Bank calculates, at the beginning of the period, the present value of the instrument's contractual cash flows using the following rates: first, an observed discount rate for similar securities that reflects the Bank's credit spread and, then, a rate that excludes the Bank's credit spread. The difference obtained between the two values is then compared to the difference obtained using the same rates at the end of the period.

Information about the financial assets and financial liabilities designated at fair value through profit or loss is provided in the following tables.

		Carrying value as at October 31, 2022	Unrealized gains (losses) for the year ended October 31, 2022	Unrealized gains (losses) since the initial recognition of the instrument

Financial assets designated at fair value through profit or loss
	Securities	1,037	(21)	(7)
		1,037	(21)	(7)

Financial liabilities designated at fair value through profit or loss
	Deposits⁽¹⁾⁽²⁾	15,355	2,888	3,062
	Liabilities related to transferred receivables	11,352	513	533
		26,707	3,401	3,595


		Carrying value as at October 31, 2021	Unrealized gains (losses) for the year ended October 31, 2021	Unrealized gains (losses) since the initial recognition of the instrument

Financial assets designated at fair value through profit or loss
	Securities	1,347	(55)	27
		1,347	(55)	27

Financial liabilities designated at fair value through profit or loss
	Deposits⁽¹⁾⁽²⁾	14,018	(636)	(316)
	Liabilities related to transferred receivables	11,398	253	27
		25,416	(383)	(289)

(1) For the year ended October 31, 2022, the change in the fair value of deposits designated at fair value through profit or loss attributable to credit risk, and recorded in Other comprehensive income, resulted in a gain of $817 million ($17 million loss for the year ended October 31, 2021).

(2) The amount at maturity that the Bank will be contractually required to pay to the holders of these deposits varies and will differ from the reporting date fair value.

Note 5 - Offsetting Financial Assets and Financial Liabilities

Generally, over-the-counter derivatives financial instruments subject to master netting agreements of the International Swaps & Derivatives Association, Inc. or other similar agreements do not meet the offsetting criteria on the Consolidated Balance Sheet, because the right of set-off is legally enforceable only in the event of default, insolvency, or bankruptcy.

Generally, securities purchased under reverse repurchase agreements and securities borrowed as well as obligations related to securities sold under repurchase agreements and securities loaned, subject to master agreements, do not meet the offsetting criteria if they confer only a right of set-off that is enforceable only in the event of default, insolvency, or bankruptcy.

However, the above-mentioned transactions may be subject to contractual netting agreements concluded with clearing houses. If the offsetting criteria are met, these transactions are netted on the Consolidated Balance Sheet. In addition, as part of these transactions, the Bank may pledge or receive cash or other financial instruments used as collateral.

The following tables present information on financial assets and financial liabilities that are netted on the Consolidated Balance Sheet, because they meet the offsetting criteria as well as information on those that are not netted and are subject to an enforceable master netting agreement or similar agreement.

							As at October 31, 2022
			Gross amounts recognized	Amounts set off on the Consolidated Balance Sheet	Net amounts reported on the Consolidated Balance Sheet	Associated amounts not set off on the Consolidated Balance Sheet
			Gross amounts recognized	Amounts set off on the Consolidated Balance Sheet	Net amounts reported on the Consolidated Balance Sheet	Financial instruments⁽¹⁾	Financial assets received/pledged as collateral⁽²⁾	Net amounts

Financial assets
	Securities purchased under reverse repurchase
		agreements and securities borrowed	32,134	5,648	26,486	1,887	24,459	140
	Derivative financial instruments		33,112	14,565	18,547	9,583	6,062	2,902
			65,246	20,213	45,033	11,470	30,521	3,042

Financial liabilities
	Obligations related to securities sold under
		repurchase agreements and securities loaned	39,121	5,648	33,473	1,887	31,440	146
	Derivative financial instruments		34,197	14,565	19,632	9,583	4,089	5,960
			73,318	20,213	53,105	11,470	35,529	6,106


							As at October 31, 2021
			Gross amounts recognized	Amounts set off on the Consolidated Balance Sheet	Net amounts reported on the Consolidated Balance Sheet	Associated amounts not set off on the Consolidated Balance Sheet
			Gross amounts recognized	Amounts set off on the Consolidated Balance Sheet	Net amounts reported on the Consolidated Balance Sheet	Financial instruments⁽¹⁾	Financial assets received/pledged as collateral⁽²⁾⁽³⁾	Net amounts

Financial assets
	Securities purchased under reverse repurchase
		agreements and securities borrowed	15,216	7,700	7,516	1,413	6,042	61
	Derivative financial instruments		20,936	4,452	16,484	9,398	2,475	4,611
			36,152	12,152	24,000	10,811	8,517	4,672

Financial liabilities
	Obligations related to securities sold under
		repurchase agreements and securities loaned	24,993	7,700	17,293	1,413	15,759	121
	Derivative financial instruments		23,819	4,452	19,367	9,398	4,015	5,954
			48,812	12,152	36,660	10,811	19,774	6,075

(1) Carrying amount of financial instruments that are subject to an enforceable master netting agreement or similar agreement but that do not satisfy offsetting criteria.

(2) Excludes collateral in the form of non-financial instruments.

(3) The financial assets pledged as collateral to the Bank of Canada included covered bonds issued by the Bank.

Note 6 - Securities

Residual Contractual Maturities of Securities

As at October 31			2022					2021
			1 year or less	Over 1 year to 5 years	Over 5 years	No specified maturity	Total	Total

Securities at fair value through profit or loss
Securities issued or guaranteed by
	Canadian government		2,563	7,609	2,750	-	12,922	9,377
	Canadian provincial and municipal governments		1,126	1,725	6,409	-	9,260	8,998
	U.S. Treasury, other U.S. agencies
		and other foreign governments	13,927	848	309	-	15,084	4,425
Other debt securities			370	1,821	1,193	-	3,384	2,531
Equity securities			-	-	-	46,725	46,725	59,480
			17,986	12,003	10,661	46,725	87,375	84,811

Securities at fair value through other comprehensive income
Securities issued or guaranteed by
	Canadian government		106	3,071	35	-	3,212	4,233
	Canadian provincial and municipal governments		2	569	1,399	-	1,970	2,313
	U.S. Treasury, other U.S. agencies
		and other foreign governments	-	1,597	281	-	1,878	1,636
Other debt securities			6	625	581	-	1,212	784
Equity securities			-	-	-	556	556	617
			114	5,862	2,296	556	8,828	9,583
Securities at amortized cost⁽¹⁾
Securities issued or guaranteed by
	Canadian government		670	5,037	30	-	5,737	5,811
	Canadian provincial and municipal governments		279	643	904	-	1,826	2,225
	U.S. Treasury, other U.S. agencies
		and other foreign governments	2	148	-	-	150	-
Other debt securities			2,850	2,814	139	-	5,803	3,874
			3,801	8,642	1,073	-	13,516	11,910

(1) As at October 31, 2022, securities at amortized cost are presented net of $7 million in allowances for credit losses ($3 million as at October 31, 2021).

Credit Quality

As at October 31, 2022 and 2021, securities at fair value through other comprehensive income and securities at amortized cost were mainly classified in Stage 1, with their credit quality falling mostly in the "Excellent" category according to the Bank's internal risk-rating categories. For additional information on the reconciliation of allowances for credit losses, see Note 7 to these consolidated financial statements.

Note 6 - Securities (cont.)

Unrealized Gross Gains (Losses) on Securities at Fair Value Through

Other Comprehensive Income

		As at October 31, 2022
		Amortized cost	Gross unrealized gains	Gross unrealized losses	Carrying value⁽¹⁾

Securities issued or guaranteed by
	Canadian government	3,386	1	(175)	3,212
	Canadian provincial and municipal governments	2,129	1	(160)	1,970
	U.S. Treasury, other U.S. agencies and other foreign governments	2,022	-	(144)	1,878
Other debt securities		1,355	-	(143)	1,212
Equity securities		570	21	(35)	556
		9,462	23	(657)	8,828

		As at October 31, 2021
		Amortized cost	Gross unrealized gains	Gross unrealized losses	Carrying value⁽¹⁾

Securities issued or guaranteed by
	Canadian government	4,241	30	(38)	4,233
	Canadian provincial and municipal governments	2,345	27	(59)	2,313
	U.S. Treasury, other U.S. agencies and other foreign governments	1,648	-	(12)	1,636
Other debt securities		782	9	(7)	784
Equity securities		569	57	(9)	617
		9,585	123	(125)	9,583

(1) The allowances for credit losses on securities at fair value through other comprehensive income (excluding equity securities), representing $2 million as at October 31, 2022 ($1 million as at October 31, 2021), are reported in Other comprehensive income. For additional information, see Note 7 to these consolidated financial statements.

Equity Securities Designated at Fair Value Through Other Comprehensive Income

The Bank designated certain equity securities, the main business objective of which is to generate dividend income, at fair value through other comprehensive income without subsequent reclassification of gains and losses to net income. During the year ended October 31, 2022, a dividend income amount of $14 million was recognized for these investments ($34 million for the year ended October 31, 2021), including an amount of $4 million in dividend income for investments that were sold during the year ended October 31, 2022 ($17 million for investments sold during the year ended October 31, 2021).

			Year ended October 31, 2022			Year ended October 31, 2021
			Equity securities of private companies	Equity securities of public companies	Total	Equity securities of private companies	Equity securities of public companies	Total

Fair value at beginning			306	311	617	373	246	619
	Change in fair value		7	(44)	(37)	(10)	98	88
	Designated at fair value through other
		comprehensive income⁽¹⁾	7	143	150	56	71	127
	Sales⁽²⁾		-	(174)	(174)	(113)	(104)	(217)
Fair value at end			320	236	556	306	311	617

(1) On October 31, 2021, the Bank concluded that it had lost significant influence over AfrAsia Bank Limited (AfrAsia) and therefore ceased using the equity method to account for this investment. The Bank designated its investment in AfrAsia as a financial asset measured at fair value through other comprehensive income in an amount of $56 million. Following the fair value measurement, a $30 million loss was recorded in the Non-interest income - Other item of the Consolidated Statement of Income and reported in the Other heading of segment results.

(2) The Bank disposed of private and public company equity securities for economic reasons.

Gains (Losses) on Disposals of Securities at Amortized Cost

During the years ended October 31, 2022 and 2021, the Bank sold certain debt securities measured at amortized cost. The carrying value of these securities upon disposal was $337 million for the year ended October 31, 2022 ($179 million for the year ended October 31, 2021), and the Bank recognized gains of $4 million for the year ended October 31, 2022 (negligible amount for the year ended October 31, 2021) in Non-interest income - Gains (losses) on non-trading securities, net in the Consolidated Statement of Income.

Note 7 - Loans and Allowances for Credit Losses

Loans are recognized either at fair value through profit or loss or at amortized cost using the financial asset classification criteria defined in IFRS 9.

Determining and Measuring Expected Credit Losses (ECL)

Determining Expected Credit Losses

Expected credit losses are determined using a three-stage impairment approach that is based on the change in the credit quality of financial assets since initial recognition.

Non-impaired loans

Stage 1

Financial assets that have experienced no significant increase in credit risk between initial recognition and the reporting date, and for which 12-month expected credit losses are recorded at the reporting date, are classified in Stage 1.

Stage 2

Financial assets that have experienced a significant increase in credit risk between initial recognition and the reporting date, and for which lifetime expected credit losses are recorded at the reporting date, are classified in Stage 2.

Impaired loans

Stage 3

Financial assets for which there is objective evidence of impairment, for which one or more events have had a detrimental impact on the estimated future cash flows of these financial assets at the reporting date, and for which lifetime expected credit losses are recorded, are classified in Stage 3.

POCI

Financial assets that are credit-impaired when purchased or originated (POCI) are classified in the POCI category.

Impairment Governance

A rigorous control framework is applied to the determination of expected credit losses. The Bank has policies and procedures that govern impairments arising from credit risk. These policies are documented and periodically reviewed by the Risk Management Group. All models used to calculate expected credit losses are validated, and controls are in place to ensure they are applied.

These models are validated by groups that are independent of the team that prepares the calculations. Complex questions on measurement methodologies and assumptions are reviewed by a group of experts from various functions. Furthermore, the inputs and assumptions used to determine expected credit losses are regularly reviewed.

Measurement of Expected Credit Losses (ECL)

Expected credit losses are estimated using three main variables: (1) probability of default (PD), (2) loss given default (LGD) and (3) exposure at default (EAD). For accounting purposes, 12-month PD and lifetime PD are the probabilities of a default occurring over the next 12 months or over the life of a financial instrument, respectively, based on conditions existing at the balance sheet date and on future economic conditions that have, or will have, an impact on credit risk. LGD reflects the losses expected should default occur and considers such factors as the mitigating effects of collateral, the realizable value thereof, and the time value of money. EAD is the expected balance owing at default and considers such factors as repayments of principal and interest between the balance sheet date and the time of default as well as any amounts expected to be drawn on a committed facility. Twelve-month expected credit losses are estimated by multiplying 12-month PD by LGD and by EAD. Lifetime expected credit losses are estimated using the lifetime PD.

For most financial instruments, expected credit losses are measured on an individual basis. Financial instruments that have credit losses measured on a collective basis are grouped according to similar credit risk characteristics such as type of instrument, geographic location, comparable risk level, and business sector or industry.

Inputs, Assumptions and Estimation Techniques

The Bank's approach to calculating expected credit losses consists essentially of leveraging existing regulatory models and then adjusting their parameters for IFRS 9 purposes. These models have the advantage of having been thoroughly tested and validated. In addition, using the same base models, regardless of the purpose, provides consistency across risk assessments. These models use inputs, assumptions and estimation techniques that require a high degree of management judgment. The main factors that contribute to changes in ECL that are subject to significant judgment include the following:

· calibration of regulatory parameters in order to obtain point-in-time and forward-looking parameters;

· forecasts of macroeconomic variables for multiple scenarios and the probability weighting of the scenarios;

· determination of the significant increases in credit risk (SICR) of a loan.

Note 7 - Loans and Allowances for Credit Losses (cont.)

Main Parameters

PD Estimates

Since the objective of the regulatory calibration of PD is to align historical data to the long-run default rate, adjustments are required to obtain a point-in-time, forward-looking PD, as required by IFRS 9. The Bank performs the following: (1) A point-in-time calibration, where the PD of the portfolio is aligned with the appropriate default rate. The resulting PD estimate generally equals the prior-year default rate. The prior-year default rate is selected for the calibration performed at this stage, as it often reflects one of the most accurate and appropriate estimates of the current-year default rate; (2) Forward-looking adjustments are incorporated through, among other measures, a calibration factor based on forecasts produced by the stress testing team's analyses. The team considers three macroeconomic scenarios, and, for each scenario, produces a forward-looking assessment covering the three upcoming years.

LGD Estimates

The LGD estimation method consists of using, for each of the three macroeconomic scenarios, expected LGD based on the LGD values observed using backtesting, the economic LGD estimated and used to calculate economic capital, and lastly, the estimated downturn LGD used to calculate regulatory capital.

EAD Estimates

For term loans, the Bank uses expected EAD, which is the outstanding balance anticipated at each point in time. Expected EAD decreases over time according to contractual repayments and to prepayments. For revolving loans, the EAD percentage is based on the percentage estimated by the corresponding regulatory model and, thereafter, is converted to dollars according to the authorized balance.

Expected Life

For most financial instruments, the expected life used when measuring expected credit losses is the remaining contractual life. For revolving financial instruments where there is no contractual maturity, such as credit cards or lines of credit, the expected life is based on the behavioural life of clients who have defaulted or closed their account.

Incorporation of Forward-Looking Information

The Bank's Economy and Strategy Group is responsible for developing three macroeconomic scenarios and for recommending probability weights for each scenario. Macroeconomic scenarios are not developed for specific portfolios, as the Economy and Strategy Group provides a set of variables for each of the defined scenarios for the next three years. The PDs are also adjusted to incorporate economic assumptions (interest rates, unemployment rates, GDP forecasts, oil prices, housing price indices, etc.) that can be statistically tied to PD changes that will have an impact beyond the next 12 months. These statistical relationships are determined using the processes developed for stress testing. In addition, the group considers other relevant factors that may not be adequately reflected in the information used to calculate the PDs (including late payments and whether the financial asset is subject to additional monitoring within the watchlist process for business and government loan portfolios).

Determination of a Significant Increase in the Credit Risk of a Financial Instrument

At each reporting period, the Bank determines whether credit risk has increased significantly since initial recognition by examining the change in the risk of default occurring over the remaining life of the financial instrument. First, the Bank compares the point-in-time forward-looking remaining lifetime PD at the reporting date with the expected point-in-time forward-looking remaining lifetime PD established at initial recognition. Based on this comparison, the Bank determines whether the loan has deteriorated when compared to the initial conditions. Because the comparison includes an adjustment based on origination-date forward-looking information and reporting-date forward-looking information, the deterioration may be caused by the following factors: (i) deterioration of the economic outlook used in the forward-looking assessment; (ii) deterioration of the borrower's conditions (payment defaults, worsening financial ratios, etc.); or (iii) a combination of both factors. The quantitative criteria used to determine a significant increase in credit risk are a series of relative and absolute thresholds, and a backstop is also applied. All financial instruments that are over 30 days past due but below 90 days past due are migrated to Stage 2, even if the other criteria do not indicate a significant increase in credit risk.

Credit Quality of Loans

The following tables present the gross carrying amounts of loans as at October 31, 2022 and 2021, according to credit quality and ECL impairment stage of each loan category at amortized cost, and according to credit quality for loans at fair value through profit or loss. For additional information on credit quality according to the Advanced Internal Ratings-Based (AIRB) categories, see the Internal Default Risk Ratings table on page 78 in the Credit Risk section of the MD&A for the year ended October 31, 2022.

				As at October 31, 2022
	Non-impaired loans		Impaired loans		Loans at fair value through profit or loss⁽¹⁾	Total
	Stage 1	Stage 2	Stage 3	POCI	Loans at fair value through profit or loss⁽¹⁾	Total
Residential mortgage
Excellent	30,465	-	-	-	-	30,465
Good	16,351	12	-	-	-	16,363
Satisfactory	10,765	3,269	-	-	-	14,034
Special mention	609	394	-	-	-	1,003
Substandard	76	140	-	-	-	216
Default	-	-	49	-	-	49
AIRB Approach	58,266	3,815	49	-	-	62,130
Standardized Approach	7,266	179	211	384	9,959	17,999
Gross carrying amount	65,532	3,994	260	384	9,959	80,129
Allowances for credit losses⁽²⁾	53	80	61	(76)	-	118
Carrying amount	65,479	3,914	199	460	9,959	80,011

Personal
Excellent	22,190	22	-	-	-	22,212
Good	8,792	479	-	-	-	9,271
Satisfactory	6,928	1,394	-	-	-	8,322
Special mention	358	775	-	-	-	1,133
Substandard	26	203	-	-	-	229
Default	-	-	130	-	-	130
AIRB Approach	38,294	2,873	130	-	-	41,297
Standardized Approach	3,837	78	36	75	-	4,026
Gross carrying amount	42,131	2,951	166	75	-	45,323
Allowances for credit losses⁽²⁾	67	113	75	(16)	-	239
Carrying amount	42,064	2,838	91	91	-	45,084

Credit card
Excellent	600	-	-	-	-	600
Good	359	-	-	-	-	359
Satisfactory	689	51	-	-	-	740
Special mention	287	178	-	-	-	465
Substandard	37	71	-	-	-	108
Default	-	-	-	-	-	-
AIRB Approach	1,972	300	-	-	-	2,272
Standardized Approach	117	-	-	-	-	117
Gross carrying amount	2,089	300	-	-	-	2,389
Allowances for credit losses⁽²⁾	31	95	-	-	-	126
Carrying amount	2,058	205	-	-	-	2,263

Business and government⁽³⁾
Excellent	6,140	2	-	-	147	6,289
Good	27,607	112	-	-	53	27,772
Satisfactory	26,567	8,803	-	-	145	35,515
Special mention	75	1,172	-	-	-	1,247
Substandard	41	272	-	-	-	313
Default	-	-	367	-	-	367
AIRB Approach	60,430	10,361	367	-	345	71,503
Standardized Approach	8,096	28	19	-	212	8,355
Gross carrying amount	68,526	10,389	386	-	557	79,858
Allowances for credit losses⁽²⁾	115	160	197	-	-	472
Carrying amount	68,411	10,229	189	-	557	79,386

Total loans and acceptances
Gross carrying amount	178,278	17,634	812	459	10,516	207,699
Allowances for credit losses⁽²⁾	266	448	333	(92)	-	955
Carrying amount	178,012	17,186	479	551	10,516	206,744

(1) Not subject to expected credit losses.

(2) The allowances for credit losses do not include the amounts related to undrawn commitments reported in the Other liabilities item of the Consolidated Balance Sheet.

(3) Includes customers' liability under acceptances.

Note 7 - Loans and Allowances for Credit Losses (cont.)

				As at October 31, 2021
	Non-impaired loans		Impaired loans		Loans at fair value through profit or loss⁽¹⁾	Total
	Stage 1	Stage 2	Stage 3	POCI	Loans at fair value through profit or loss⁽¹⁾	Total
Residential mortgage
Excellent	28,911	1	-	-	-	28,912
Good	17,083	53	-	-	-	17,136
Satisfactory	9,165	2,318	-	-	-	11,483
Special mention	314	266	-	-	-	580
Substandard	83	128	-	-	-	211
Default	-	-	82	-	-	82
AIRB Approach	55,556	2,766	82	-	-	58,404
Standardized Approach	5,803	129	57	332	7,817	14,138
Gross carrying amount	61,359	2,895	139	332	7,817	72,542
Allowances for credit losses⁽²⁾	50	52	29	(60)	-	71
Carrying amount	61,309	2,843	110	392	7,817	72,471

Personal
Excellent	16,211	57	-	-	-	16,268
Good	11,439	1,041	-	-	-	12,480
Satisfactory	4,665	1,580	-	-	-	6,245
Special mention	336	483	-	-	-	819
Substandard	121	129	-	-	-	250
Default	-	-	101	-	-	101
AIRB Approach	32,772	3,290	101	-	-	36,163
Standardized Approach	4,692	51	15	132	-	4,890
Gross carrying amount	37,464	3,341	116	132	-	41,053
Allowances for credit losses⁽²⁾	70	98	63	(29)	-	202
Carrying amount	37,394	3,243	53	161	-	40,851

Credit card
Excellent	559	-	-	-	-	559
Good	322	-	-	-	-	322
Satisfactory	623	38	-	-	-	661
Special mention	294	149	-	-	-	443
Substandard	38	62	-	-	-	100
Default	-	-	-	-	-	-
AIRB Approach	1,836	249	-	-	-	2,085
Standardized Approach	65	-	-	-	-	65
Gross carrying amount	1,901	249	-	-	-	2,150
Allowances for credit losses⁽²⁾	33	89	-	-	-	122
Carrying amount	1,868	160	-	-	-	2,028

Business and government⁽³⁾
Excellent	5,086	-	-	-	269	5,355
Good	24,395	131	-	-	53	24,579
Satisfactory	22,808	6,254	-	-	140	29,202
Special mention	128	1,509	-	-	-	1,637
Substandard	45	194	-	-	-	239
Default	-	-	326	-	-	326
AIRB Approach	52,462	8,088	326	-	462	61,338
Standardized Approach	6,179	84	81	-	260	6,604
Gross carrying amount	58,641	8,172	407	-	722	67,942
Allowances for credit losses⁽²⁾	111	205	287	-	-	603
Carrying amount	58,530	7,967	120	-	722	67,339

Total loans and acceptances
Gross carrying amount	159,365	14,657	662	464	8,539	183,687
Allowances for credit losses⁽²⁾	264	444	379	(89)	-	998
Carrying amount	159,101	14,213	283	553	8,539	182,689

(1) Not subject to expected credit losses.

(2) The allowances for credit losses do not include the amounts related to undrawn commitments reported in the Other liabilities item of the Consolidated Balance Sheet.

(3) Includes customers' liability under acceptances.

The following table presents the credit risk exposures of off-balance-sheet commitments as at October 31, 2022 and 2021 according to credit quality and ECL impairment stage.

As at October 31		2022				2021
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
Off-balance-sheet commitments⁽¹⁾
Retail
Excellent	15,292	13	-	15,305	17,053	72	-	17,125
Good	3,316	165	-	3,481	3,750	323	-	4,073
Satisfactory	1,170	180	-	1,350	1,085	229	-	1,314
Special mention	193	68	-	261	197	57	-	254
Substandard	15	15	-	30	16	13	-	29
Default	-	-	1	1	-	-	3	3
Non-retail
Excellent	13,136	-	-	13,136	14,097	-	-	14,097
Good	18,723	24	-	18,747	17,497	2	-	17,499
Satisfactory	7,894	3,488	-	11,382	7,575	2,377	-	9,952
Special mention	12	246	-	258	14	336	-	350
Substandard	4	24	-	28	5	38	-	43
Default	-	-	18	18	-	-	3	3
AIRB Approach	59,755	4,223	19	63,997	61,289	3,447	6	64,742
Standardized Approach	15,432	-	-	15,432	14,872	-	1	14,873
Total exposure	75,187	4,223	19	79,429	76,161	3,447	7	79,615
Allowances for credit losses	99	63	-	162	104	58	-	162
Total exposure, net of allowances	75,088	4,160	19	79,267	76,057	3,389	7	79,453

(1) Represent letters of guarantee and documentary letters of credit, undrawn commitments, and backstop liquidity and credit enhancement facilities.

Loans Past Due But Not Impaired⁽¹⁾

As at October 31		2022						2021
		Residential mortgage	Personal	Credit card	Business and government⁽²⁾	Residential mortgage	Personal	Credit card	Business and government⁽²⁾

Past due but not impaired
	31 to 60 days	106	105	23	23	48	71	20	24
	61 to 90 days	38	30	11	9	18	21	9	13
	Over 90 days⁽³⁾	-	-	22	-	-	-	21	-
		144	135	56	32	66	92	50	37

(1) Loans less than 31 days past due are not presented as they are not considered past due from an administrative standpoint.

(2) Includes customers' liability under acceptances.

(3) All loans more than 90 days past due, except for credit card receivables, are considered impaired (Stage 3).

Note 7 - Loans and Allowances for Credit Losses (cont.)

Impaired Loans

As at October 31			2022		2021
		Gross	Allowances for credit losses	Net	Gross	Allowances for credit losses	Net

Loans - Stage 3
	Residential mortgage	260	61	199	139	29	110
	Personal	166	75	91	116	63	53
	Credit card⁽¹⁾	-	-	-	-	-	-
	Business and government⁽²⁾	386	197	189	407	287	120
		812	333	479	662	379	283
Loans - POCI		459	(92)	551	464	(89)	553
		1,271	241	1,030	1,126	290	836

(1) Credit card receivables are considered impaired, at the latest, when payment is 180 days past due, and they are written off at that time.

(2) Includes customers' liability under acceptances.

Maximum Exposure to Credit Risk of Impaired Loans

The following table presents the maximum exposure to credit risk of impaired loans, the percentage of exposure covered by guarantees, and the main types of collateral and guarantees held for each loan category.

As at October 31			2022		2021
		Gross impaired loans	Percentage covered by guarantees⁽¹⁾	Gross impaired loans	Percentage covered by guarantees⁽¹⁾	Types of collateral and guarantees

Loans - Stage 3
	Residential mortgage	260	100 %	139	100 %	Residential buildings
	Personal	166	56 %	116	47 %	Buildings, land and automobiles
	Business and government⁽²⁾	386	59 %	407	62 %	Buildings, land, equipment,
						government and bank guarantees
Loans - POCI		459	52 %	464	36 %	Buildings and automobiles

(1) For gross impaired loans, the ratio is calculated on a weighted average basis using the estimated value of the collateral and guarantees held for each loan category presented. The value of the collateral and guarantees held for a specific loan may exceed the balance of the loan; when this is the case, the ratio is capped at 100%.

(2) Includes customers' liability under acceptances.

Allowances for Credit Losses

The following tables present a reconciliation of the allowances for credit losses by Consolidated Balance Sheet item and by type of off-balance-sheet commitment.

						Year ended October 31, 2022
		Allowances for credit losses as at October 31, 2021	Provisions for credit losses	Write-offs⁽¹⁾	Disposals	Recoveries and other	Allowances for credit losses as at October 31, 2022
Balance sheet
Cash and deposits with financial institutions⁽²⁾⁽³⁾		5	-	-	-	-	5

Securities⁽³⁾
	At fair value through other comprehensive income⁽⁴⁾	1	1	-	-	-	2
	At amortized cost⁽²⁾	3	4	-	-	-	7

Securities purchased under reverse repurchase
	agreements and securities borrowed⁽²⁾⁽³⁾	-	-	-	-	-	-

Loans⁽⁵⁾
	Residential mortgage	71	46	(3)	-	4	118
	Personal	202	69	(52)	-	20	239
	Credit card	122	49	(62)	-	17	126
	Business and government	515	10	(116)	-	9	418
	Customers' liability under acceptances	88	(34)	-	-	-	54
		998	140	(233)	-	50	955

Other assets⁽²⁾⁽³⁾		-	-	-	-	-	-

Off-balance-sheet commitments⁽⁶⁾
Letters of guarantee and documentary letters of credit		13	-	-	-	-	13
Undrawn commitments		143	-	-	-	-	143
Backstop liquidity and credit enhancement facilities		6	-	-	-	-	6
		162	-	-	-	-	162
		1,169	145	(233)	-	50	1,131

						Year ended October 31, 2021
		Allowances for credit losses as at October 31, 2020	Provisions for credit losses	Write-offs⁽¹⁾	Disposals	Recoveries and other	Allowances for credit losses as at October 31, 2021
Balance sheet
Cash and deposits with financial institutions⁽²⁾⁽³⁾		5	-	-	-	-	5

Securities⁽³⁾
	At fair value through other comprehensive income⁽⁴⁾	3	(2)	-	-	-	1
	At amortized cost⁽²⁾	1	2	-	-	-	3

Securities purchased under reverse repurchase
	agreements and securities borrowed⁽²⁾⁽³⁾	-	-	-	-	-	-

Loans⁽⁵⁾
	Residential mortgage	65	12	(6)	-	-	71
	Personal	298	(29)	(69)	(14)	16	202
	Credit card	169	(5)	(59)	-	17	122
	Business and government	533	43	(58)	-	(3)	515
	Customers' liability under acceptances	93	(5)	-	-	-	88
		1,158	16	(192)	(14)	30	998

Other assets⁽²⁾⁽³⁾		-	-	-	-	-	-

Off-balance-sheet commitments⁽⁶⁾
Letters of guarantee and documentary letters of credit		15	(2)	-	-	-	13
Undrawn commitments		157	(14)	-	-	-	143
Backstop liquidity and credit enhancement facilities		4	2	-	-	-	6
		176	(14)	-	-	-	162

		1,343	2	(192)	(14)	30	1,169

(1) The contractual amount outstanding on financial assets that were written off during the year ended October 31, 2022 and that are still subject to enforcement activity was $91 million ($105 million for the year ended October 31, 2021).

(2) These financial assets are presented net of the allowances for credit losses on the Consolidated Balance Sheet.

(3) As at October 31, 2022 and 2021, these financial assets were mainly classified in Stage 1 and their credit quality fell mostly within the Excellent category.

(4) The allowances for credit losses are reported in the Accumulated other comprehensive income item of the Consolidated Balance Sheet.

(5) The allowances for credit losses are reported in the Allowances for credit losses item of the Consolidated Balance Sheet.

(6) The allowances for credit losses are reported in the Other liabilities item of the Consolidated Balance Sheet.

Note 7 - Loans and Allowances for Credit Losses (cont.)

The following tables present the reconciliation of allowances for credit losses for each loan category at amortized cost according to ECL impairment stage.

Year ended October 31					2022					2021
			Allowances for credit losses on non-impaired loans		Allowances for credit losses on impaired loans		Total	Allowances for credit losses on non-impaired loans		Allowances for credit losses on impaired loans		Total
			Stage 1	Stage 2	Stage 3	POCI⁽¹⁾	Total	Stage 1	Stage 2	Stage 3	POCI⁽¹⁾	Total
Residential mortgage
Balance at beginning			50	52	29	(60)	71	63	23	35	(56)	65
	Originations or purchases		19	-	-	-	19	12	-	-	-	12
	Transfers⁽²⁾:
		to Stage 1	19	(17)	(2)	-	-	18	(13)	(5)	-	-
		to Stage 2	(10)	13	(3)	-	-	(4)	5	(1)	-	-
		to Stage 3	(1)	(7)	8	-	-	-	(1)	1	-	-
	Net remeasurement of loss allowances⁽³⁾		(24)	39	29	(9)	35	(33)	39	6	(7)	5
	Derecognitions⁽⁴⁾		(3)	(3)	(3)	-	(9)	(3)	(1)	(1)	-	(5)
	Changes to models		-	1	-	-	1	-	-	-	-	-
Provisions for credit losses			-	26	29	(9)	46	(10)	29	-	(7)	12
Write-offs			-	-	(3)	-	(3)	-	-	(6)	-	(6)
Disposals			-	-	-	-	-	-	-	-	-	-
Recoveries			-	-	3	-	3	-	-	2	-	2
Foreign exchange movements and other			3	2	3	(7)	1	(3)	-	(2)	3	(2)
Balance at end			53	80	61	(76)	118	50	52	29	(60)	71
Includes:
	Amounts drawn		53	80	61	(76)	118	50	52	29	(60)	71
	Undrawn commitments⁽⁵⁾		-	-	-	-	-	-	-	-	-	-
Personal
Balance at beginning			73	103	63	(29)	210	89	148	76	(10)	303
	Originations or purchases		45	-	-	-	45	41	-	-	-	41
	Transfers⁽²⁾:
		to Stage 1	61	(56)	(5)	-	-	73	(66)	(7)	-	-
		to Stage 2	(21)	23	(2)	-	-	(12)	14	(2)	-	-
		to Stage 3	-	(31)	31	-	-	-	(27)	27	-	-
	Net remeasurement of loss allowances⁽³⁾		(72)	85	28	15	56	(96)	58	19	(19)	(38)
	Derecognitions⁽⁴⁾		(9)	(15)	(5)	-	(29)	(12)	(15)	(2)	-	(29)
	Changes to models		(10)	6	-	-	(4)	-	-	-	-	-
Provisions for credit losses			(6)	12	47	15	68	(6)	(36)	35	(19)	(26)
Write-offs			-	-	(52)	-	(52)	-	-	(69)	-	(69)
Disposals			-	-	-	-	-	(8)	(6)	-	-	(14)
Recoveries			-	-	17	-	17	-	-	21	-	21
Foreign exchange movements and other			3	2	-	(2)	3	(2)	(3)	-	-	(5)
Balance at end			70	117	75	(16)	246	73	103	63	(29)	210
Includes:
	Amounts drawn		67	113	75	(16)	239	70	98	63	(29)	202
	Undrawn commitments⁽⁵⁾		3	4	-	-	7	3	5	-	-	8

(1) The total amount of undiscounted initially expected credit losses on the POCI loans acquired during the year ended October 31, 2022 was $15 million ($11 million for the year ended October 31, 2021). The expected credit losses reflected in the purchase price have been discounted.

(2) Represent stage transfers deemed to have taken place at the beginning of the quarter in which the transfer occurred.

(3) Includes the net remeasurement of loss allowances (after transfers) attributable mainly to changes in volumes and in the credit quality of existing loans as well as to changes in risk parameters.

(4) Represent reversals to loss allowances arising from full loan repayments (excluding write-offs and disposals).

(5) The allowances for credit losses on undrawn commitments are reported in the Other liabilities item of the Consolidated Balance Sheet.

Year ended October 31					2022					2021
			Allowances for credit losses on non-impaired loans		Allowances for credit losses on impaired loans		Total	Allowances for credit losses on non-impaired loans		Allowances for credit losses on impaired loans		Total
			Stage 1	Stage 2	Stage 3	POCI⁽¹⁾	Total	Stage 1	Stage 2	Stage 3	POCI⁽¹⁾	Total
Credit card
Balance at beginning			57	101	-	-	158	68	137	-	-	205
	Originations or purchases		12	-	-	-	12	10	-	-	-	10
	Transfers⁽²⁾:
		to Stage 1	84	(84)	-	-	-	100	(100)	-	-	-
		to Stage 2	(16)	16	-	-	-	(15)	15	-	-	-
		to Stage 3	(1)	(23)	24	-	-	(1)	(29)	30	-	-
	Net remeasurement of loss allowances⁽³⁾		(80)	104	21	-	45	(100)	84	12	-	(4)
	Derecognitions⁽⁴⁾		(2)	(1)	-	-	(3)	(2)	(2)	-	-	(4)
	Changes to models		(1)	(1)	-	-	(2)	(3)	(4)	-	-	(7)
Provisions for credit losses			(4)	11	45	-	52	(11)	(36)	42	-	(5)
Write-offs			-	-	(62)	-	(62)	-	-	(59)	-	(59)
Disposals			-	-	-	-	-	-	-	-	-	-
Recoveries			-	-	17	-	17	-	-	17	-	17
Foreign exchange movements and other			-	-	-	-	-	-	-	-	-	-
Balance at end			53	112	-	-	165	57	101	-	-	158
Includes:
	Amounts drawn		31	95	-	-	126	33	89	-	-	122
	Undrawn commitments⁽⁵⁾		22	17	-	-	39	24	12	-	-	36
Business and government⁽⁶⁾
Balance at beginning			177	238	287	-	702	214	287	241	-	742
	Originations or purchases		82	-	-	-	82	116	-	-	-	116
	Transfers⁽²⁾:
		to Stage 1	67	(65)	(2)	-	-	60	(58)	(2)	-	-
		to Stage 2	(27)	31	(4)	-	-	(43)	48	(5)	-	-
		to Stage 3	-	(3)	3	-	-	-	(21)	21	-	-
	Net remeasurement of loss allowances⁽³⁾		(93)	21	24	-	(48)	(131)	24	98	-	(9)
	Derecognitions⁽⁴⁾		(29)	(27)	(4)	-	(60)	(38)	(42)	(6)	-	(86)
	Changes to models		-	-	-	-	-	-	-	-	-	-
Provisions for credit losses			-	(43)	17	-	(26)	(36)	(49)	106	-	21
Write-offs			-	-	(116)	-	(116)	-	-	(58)	-	(58)
Disposals			-	-	-	-	-	-	-	-	-	-
Recoveries			-	-	3	-	3	-	-	4	-	4
Foreign exchange movements and other			-	-	6	-	6	(1)	-	(6)	-	(7)
Balance at end			177	195	197	-	569	177	238	287	-	702
Includes:
	Amounts drawn		115	160	197	-	472	111	205	287	-	603
	Undrawn commitments⁽⁵⁾		62	35	-	-	97	66	33	-	-	99
Total allowances for credit losses at end⁽⁷⁾			353	504	333	(92)	1,098	357	494	379	(89)	1,141
Includes:
	Amounts drawn		266	448	333	(92)	955	264	444	379	(89)	998
	Undrawn commitments⁽⁵⁾		87	56	-	-	143	93	50	-	-	143

(2) Represent stage transfers deemed to have taken place at the beginning of the quarter in which the transfer occurred.

(3) Includes the net remeasurement of loss allowances (after transfers) attributable mainly to changes in volumes and in the credit quality of existing loans as well as to changes in risk parameters.

(4) Represent reversals to loss allowances arising from full loan repayments (excluding write-offs and disposals).

(5) The allowances for credit losses on undrawn commitments are reported in the Other liabilities item of the Consolidated Balance Sheet.

(6) Includes customers' liability under acceptances.

(7) Excludes allowances for credit losses on other financial assets at amortized cost and on off-balance-sheet commitments other than undrawn commitments.

Note 7 - Loans and Allowances for Credit Losses (cont.)

Distribution of Gross and Impaired Loans by Borrower Category

Under the Basel Asset Classes

						2022					2021
		As at October 31			Year ended October 31		As at October 31			Year ended October 31
		Gross loans⁽¹⁾	Impaired loans⁽¹⁾	Allowances for credit losses on impaired loans⁽¹⁾⁽²⁾	Provisions for credit losses	Write-offs	Gross loans⁽¹⁾	Impaired loans⁽¹⁾	Allowances for credit losses on impaired loans⁽¹⁾⁽²⁾	Provisions for credit losses	Write-offs
Retail
	Residential mortgage⁽³⁾	95,575	299	64	31	4	89,035	153	31	(2)	6
	Qualifying revolving retail⁽⁴⁾	3,801	16	12	54	72	3,589	12	10	48	77
	Other retail⁽⁵⁾	14,899	102	58	36	41	12,949	67	49	32	51
		114,275	417	134	121	117	105,573	232	90	78	134
Non-retail
	Agriculture	8,109	31	2	(1)	-	7,357	30	4	(5)	1
	Oil and gas⁽⁶⁾	1,435	6	6	(19)	26	1,807	55	49	3	9
	Mining	1,049	11	4	4	-	529	-	-	-	-
	Utilities⁽⁶⁾	9,682	35	35	(2)	59	7,687	102	93	73	-
	Non-real-estate construction⁽⁷⁾	1,935	38	32	5	-	1,541	37	27	11	-
	Manufacturing⁽⁶⁾	7,374	21	10	(4)	14	5,720	40	25	3	2
	Wholesale	3,241	35	26	2	-	2,598	29	23	10	3
	Retail	3,494	30	19	2	-	2,978	27	18	2	1
	Transportation	2,209	8	7	-	-	1,811	8	7	-	-
	Communications	1,830	11	10	2	-	1,441	19	8	2	10
	Financial services⁽⁶⁾	10,777	5	3	-	-	8,870	7	2	1	-
	Real estate services and real estate construction⁽⁸⁾	22,382	26	6	1	12	18,195	36	16	1	2
	Professional services	2,338	9	4	-	1	1,872	8	4	-	5
	Education and health care	3,412	108	25	25	2	4,073	5	3	5	4
	Other services	6,247	20	9	2	2	5,875	26	9	(1)	21
	Government	1,661	-	-	-	-	1,159	-	-	-	-
	Other⁽⁶⁾	5,790	1	1	-	-	4,137	1	1	-	-
		92,965	395	199	17	116	77,650	430	289	105	58
Excluding POCI loans		207,240	812	333	138	233	183,223	662	379	183	192
POCI		459	459	(92)	6		464	464	(89)	(26)
		207,699	1,271	241	144	233	183,687	1,126	290	157	192
Stages 1 and 2⁽⁹⁾					1					(155)
					145	233				2	192

(1) Includes customers' liability under acceptances.

(2) Allowances for credit losses on drawn amounts.

(3) Includes residential mortgages on one-to-four-unit dwellings (Basel definition) and home equity lines of credit.

(4) Includes lines of credit and credit card receivables.

(5) Includes consumer loans and other retail loans but excludes SME loans.

(6) In fiscal 2022, the presentation was changed to better align borrower categories with their definitions. Comparative figures have been reclassified.

(7) Includes civil engineering loans, public-private partnership loans, and project finance loans.

(8) Includes residential mortgages on dwellings of five or more units and SME loans.

(9) Includes provisions for credit losses on other financial assets at amortized cost and on off-balance-sheet commitments.

Main Macroeconomic Factors

The following tables show the main macroeconomic factors used to estimate the allowances for credit losses on loans. For each scenario, namely, the base scenario, upside scenario, and downside scenario, the average values of the macroeconomic factors over the next 12 months (used for Stage 1 credit loss calculations) and over the remaining forecast period (used for Stage 2 credit loss calculations) are presented.

										As at October 31, 2022
		Base scenario				Upside scenario					Downside scenario
		Next 12 months		Remaining forecast period		Next 12 months		Remaining forecast period			Next 12 months		Remaining forecast period

Macroeconomic factors⁽¹⁾
	GDP growth⁽²⁾	0.6	%	1.7	%	1.1	%	1.6	%		(5.2)	%	2.9	%
	Unemployment rate	6.0	%	6.1	%	5.4	%	5.4	%		7.4	%	6.4	%
	Housing price index growth⁽²⁾	(11.2)	%	0.7	%	-	%	0.2	%		(13.9)	%	0.3	%
	BBB spread⁽³⁾	2.4	%	2.1	%	2.0	%	1.9	%		3.4	%	2.6	%
	S&P/TSX growth⁽²⁾⁽⁴⁾	(4.3)	%	2.4	%	5.1	%	2.6	%		(25.6)	%	5.5	%
	WTI oil price⁽⁵⁾ (US$ per barrel)	78		77		102		97			44		51

										As at October 31, 2021
		Base scenario				Upside scenario					Downside scenario
		Next 12 months		Remaining forecast period		Next 12 months		Remaining forecast period			Next 12 months		Remaining forecast period

Macroeconomic factors⁽¹⁾
	GDP growth⁽²⁾	4.2	%	1.6	%	4.7	%	1.9	%		(5.5)	%	3.7	%
	Unemployment rate	6.6	%	6.3	%	6.3	%	5.6	%		9.5	%	7.8	%
	Housing price index growth⁽²⁾	2.0	%	0.2	%	4.0	%	1.9	%		(11.5)	%	1.2	%
	BBB spread⁽³⁾	1.7	%	1.9	%	1.6	%	1.7	%		3.1	%	2.2	%
	S&P/TSX growth⁽²⁾⁽⁴⁾	4.8	%	2.1	%	8.6	%	3.1	%		(25.6)	%	5.5	%
	WTI oil price⁽⁵⁾ (US$ per barrel)	70		65		77		77			35		34

(1) All macroeconomic factors are based on the Canadian economy unless otherwise indicated.

(2) Growth rate is annualized.

(3) Yield on corporate BBB bonds less yield on Canadian federal government bonds with a 10-year maturity.

(4) Main stock index in Canada.

(5) The West Texas Intermediate (WTI) index is commonly used as a benchmark for the price of oil.

The main macroeconomic factors used for the personal credit portfolio are unemployment rate and growth in the housing price index, based on the economy of Canada or Quebec. The main macroeconomic factors used for the business and government credit portfolio are unemployment rate, spread on corporate BBB bonds, S&P/TSX growth, and WTI oil price.

An increase in unemployment rate or BBB spread will generally lead to higher allowances for credit losses, whereas an increase in the other macroeconomic factors (GDP, S&P/TSX, housing price index, and WTI oil price) will generally lead to lower allowances for credit losses.

Note 7 - Loans and Allowances for Credit Losses (cont.)

During the year ended October 31, 2022, the macroeconomic outlook generally deteriorated.

In the base scenario, the global economy faces a cycle of synchronized monetary tightening designed to curb inflation in a still uncertain geopolitical environment. The Canadian economy is relatively well positioned thanks to a resource sector that is benefitting from higher commodity prices. However, as is the case in other countries, higher interest rates slow the economy. The labour market already shows signs of cooling, and lower hiring intentions do not point to a short-term turnaround. In the housing resale market, a noticeable downtrend persists and home prices continue to decline. In such a scenario, inflation decelerates significantly, enabling the central bank to cease raising its policy rate. All in all, a significant economic slowdown occurs in the coming quarters, as consumers simultaneously deal with a loss in purchasing power, a negative wealth effect, and interest payment shock. After 12 months, the unemployment rate rises a full percentage point to 6.2%. Housing prices slide 11.2% year over year, the S&P/TSX is at 18,500 points after one year, and the price of oil hovers around US$77.

In the upside scenario, the economy surprises slightly in a positive direction owing to a resilient labour market. Governments continue to support the Canadian and U.S. economies. Consumer spending also surprises to the upside given the excess savings accumulated since the start of the pandemic. While the economy remains solid, the central bank does not need to significantly tighten monetary policy as inflation stabilizes given a normalization of supply chains and easing geopolitical tensions. After one year, the unemployment rate is more favourable than that of the base scenario (seven-tenths lower). Housing prices remain unchanged, the S&P/TSX is at 20,300 points after one year, and the price of oil hovers around US$102.

In the downside scenario, supply chain issues persist and the geopolitical landscape remains highly uncertain. The global economy stagnates with several countries seeing a drop in economic activity. In addition, central banks underestimated the impact of rising interest rates in a context of persistent supply shock. Given budgetary constraints, governments have a limited capacity to support households and businesses. After 12 months, the economic contraction pushes the unemployment rate to 8.2%. Housing prices decrease considerably, the S&P/TSX slides to 14,380 points after one year, and the price of oil falls to US$36.

Given uncertainty surrounding the key inputs used to measure credit losses, the Bank has applied expert credit judgment to adjust the modelled ECL results.

Sensitivity Analysis of Allowances for Credit Losses on Non-Impaired Loans

Scenarios

The following table shows a comparison of the Bank's allowances for credit losses on non-impaired loans (Stages 1 and 2) as at October 31, 2022 based on the probability weightings of three scenarios with allowances for credit losses resulting from simulations of each scenario weighted at 100%.

		Allowances for credit losses on non-impaired loans

Balance as at October 31, 2022		857

Simulations
	100% upside scenario	603
	100% base scenario	693
	100% downside scenario	1,123

Migration

The following table shows a comparison of the Bank's allowances for credit losses on non-impaired loans (Stages 1 and 2) as at October 31, 2022 with the estimated allowances for credit losses that would result if all these non-impaired loans were in Stage 1.

		Allowances for credit losses on non-impaired loans

Balance as at October 31, 2022		857

Simulations
	Non-impaired loans if they were all in Stage 1	664