CWB reports second quarter 2024 performance

Edmonton, May 31, 2024 – CWB Financial Group (TSX: CWB) (CWB) announced financial performance for the three and six months ended April 30, 2024, with quarterly common shareholders’ net income of $76 million and adjusted earnings per common share⁽¹⁾ (EPS) of $0.81 both up 9% from the prior year. Pre-tax, pre-provision income⁽¹⁾ increased by 15% from the prior year, which reflected strong revenue growth from the expansion of our net interest margin⁽¹⁾ and our continued measures to contain expense growth to drive positive operating leverage⁽¹⁾ of 5.9%. Growth in earnings this quarter was partially offset by an increase in the provision for credit losses as a percentage of average loans⁽¹⁾, with the current quarter provision slightly above our historical normal range.

Quarterly common shareholders’ net income and adjusted EPS decreased 13% sequentially. Pre-tax, pre-provision income decreased 7%, reflecting the impact of two fewer interest-earning days and seasonally higher non-interest expenses.

Our Board of Directors declared a cash dividend of $0.35 per common share, up two cents, or 6% from the dividend declared last year and one cent, or 3%, from last quarter.

“We are well positioned to increase our loan growth through the back half of the year,” said Chris Fowler, President and CEO. “Through the first half of the year, we have delivered a slower pace of loan growth than we originally anticipated which has dampened our full year revenue expectations and reduced our outlook for annual adjusted earnings per common share.”

“We will leverage our strong balance sheet and differentiated client experience to capitalize on a compelling opportunity to expand our market share as the economy strengthens. We have a history of accelerating our loan growth leading out of challenging economic times and our teams will execute our winning playbook to drive more growth across our Canadian footprint.”

• Adjusted EPS, pre-tax, pre-provision income, net interest margin, operating leverage and the provision for credit losses on total loans as a percentage of average loans are non-GAAP measures. Refer to definitions and detail provided on pages 4 and 5.

CWB 2024 Second Quarter Report

Financial Performance

 

			Common shareholders’ net income	$76 million	Up 9%
	Q2 2024,		Diluted EPS	$0.79	Up 8%
			Adjusted EPS	$0.81	Up 9%
	compared to
			Adjusted Return on Equity (ROE)	8.9%	No change
	Q2 2023(1)
			Efficiency ratio	52.3%	Down 300 bp
			Pre-tax, pre-provision income	$137 million	Up 15%

 

• Adjusted ROE and efficiency ratio are non-GAAP measures. Refer to definitions and detail provided on pages 4 and 5. bp – basis point

Common shareholders’ net income increased 9% compared to the same quarter last year as an 8% increase in revenue was partially offset by an increase in the total provision for credit losses as a percentage of average loans. An expanding net interest margin and our prudent expense management also drove 5.9% operating leverage and a 15% increase in our pre-tax, pre-provision income compared to the prior year.

Higher revenue was primarily driven by an 8% increase in net interest income, which was driven by a 14 basis point increase in net interest margin. The increase in net interest margin primarily reflected the benefit of increased yields on fixed term assets from higher market interest rates, which had a larger impact than the increase in deposit costs.

Non-interest expenses were up 2% primarily due to higher expenses associated with the opening of our new Toronto financial district banking centre and the phased roll-out of our new commercial digital and cash management platform. Higher non-interest expenses were partially offset by lower people costs associated with a temporary reduction in our overall staffing levels following our reorganization activities.

The second quarter effective tax rate was down 220 basis points from last year, reflecting the impacts of non-recurring adjustments arising from the completion of our 2023 tax filings this quarter.

The provision for credit losses on total loans as a percentage of average loans represented 26 basis points this quarter and was 14 basis points higher than the same quarter last year. A 24 basis point impaired loan provision was slightly above our historical normal experience, while the 12 basis point provision last year was significantly below.

			Common shareholders’ net income	$76 million	Down 13%
	Q2 2024,		Diluted EPS	$0.79	Down 13%
			Adjusted EPS	$0.81	Down 13%
	compared to
			Adjusted ROE	8.9%	Down 120 bp
	Q1 2024
			Efficiency ratio	52.3%	Up 310 bp
			Pre-tax, pre-provision income	$137 million	Down 7%

 

Compared to the prior quarter, lower common shareholders’ net income was primarily driven by higher non-interest expenses, a seven basis point increase in the total provision for credit losses as a percentage of average loans and a 1% decrease in revenue. Pre-tax, pre-provision income decreased 7%.

Lower revenue reflected a 4% decrease in net interest income, partially offset by a 17% increase in non-interest income. Higher non-interest income was driven by the combined impacts of higher foreign exchange income and higher wealth management fees. Net interest income decreased compared to the last quarter primarily due to two fewer interest-earning days and lower average interest-bearing assets. Net interest margin was consistent with the prior quarter as we benefitted from an increase in fixed term asset yields which exceeded the increase in deposit costs and from lower average liquidity. These benefits were offset by the impact from the $250 million subordinated debentures issued late in the first quarter to replace the Series F Non-Viability Contingent Capital (NVCC) subordinated debentures, which will be redeemed in the third quarter.

Non-interest expenses increased 4%, driven by the seasonal increase in statutory employee benefits and the timing of continued investments in our strategic priorities.

The provision for credit losses on total loans as a percentage of average loans was seven basis points higher than last quarter, reflecting a five basis point increase in the impaired loan provision and a two basis point increase in the performing loan provision.

CWB 2024 Second Quarter Report

2

 

			Common shareholders’ net income	$164 million	No change
	YTD 2024,		Diluted EPS	$1.70	Down 1%
			Adjusted EPS	$1.74	Down 1%
	compared to
			Adjusted ROE	9.5%	Down 90 bp
	YTD 2023
			Efficiency ratio	50.7%	Down 330 bp
			Pre-tax, pre-provision income	$284 million	Up 15%

 

bp – basis point

Common shareholders’ net income was consistent with last year as an increase in revenue was offset by a 21 basis point increase in the total provision for credit losses. Pre-tax, pre-provision income increased 15%.

Total revenue increased 7%, primarily reflecting an 8% increase in net interest income. Net interest margin increased by 11 basis points, which primarily reflected the benefit of increased yields on fixed term assets from higher market interest rates, which had a larger impact than the increase in deposit costs.

The total provision for credit losses as a percentage of average loans of 22 basis points was 21 basis points higher than the prior year, due to a 22 basis point increase in the impaired loan provision, partially offset by a one basis point decrease in the performing loan provision. The prior year impaired loan provision represented a one basis point recovery, primarily due to the reversal of a previously impaired loan write-off recognized in the first quarter of last year.

About CWB Financial Group

CWB Financial Group (CWB) is the only full-service bank in Canada with a strategic focus to meet the unique financial needs of businesses and their owners. We provide our nationwide clients with full-service business and personal banking, specialized financing, comprehensive wealth management offerings, and trust services. Clients choose CWB for a differentiated level of service through specialized expertise, customized solutions, and faster response times relative to the competition. Our people take the time to understand our clients and their business, and work as a united team to provide holistic solutions and advice.

As a public company on the Toronto Stock Exchange (TSX), CWB trades under the symbols “CWB” (common shares), “CWB.PR.B” (Series 5 preferred shares) and “CWB.PR.D” (Series 9 preferred shares). We are firmly committed to the responsible creation of value for all our stakeholders and our approach to sustainability will support our continued success. Learn more at www.cwb.com.

Fiscal 2024 Second Quarter Results Conference Call

CWB’s second quarter results conference call is scheduled for Friday, May 31, 2024, at 10:00 a.m. ET (8:00 a.m.MT). CWB’s executives will comment on financial results and respond to questions from analysts.

The conference call may be accessed on a listen-only basis by dialing (416) 764-8688 (Toronto) or 1 (888) 390-0546 (toll-free) and entering passcode: 39517734. The call will also be webcast live on CWB’s website:

www.cwb.com/investor-relations/quarterly-reports.

A replay of the conference call will be available until June 7, 2024 by dialing (416) 764-8677 (Toronto) or 1 (888) 390-0541 (toll-free) and entering passcode: 517734#.

FOR FURTHER INFORMATION CONTACT:

Chris Williams, MBA

AVP, Investor Relations

Phone: (780) 508-8229

Email: chris.williams@cwbank.com

NT4