Fluctuations in the value of securities are generally attributed to changes in interest rates, movements in market credit spreads and shifts in the interest rate curve. Net unrealized losses, before tax, recorded on the consolidated balance sheet at October 31, 2022 totaled $160 million, compared to net unrealized losses of $41 million last year. The increase in net unrealized losses on cash and securities compared to the prior year is primarily driven by the significant and rapid increase in market interest rates in the current year. During the year and in line with our liquidity management strategies and risk appetite, we recognized nominal net losses on security sales in earnings, compared to $3 million of net gains on security sales in the prior year, which were elevated from the re-balancing of our cash and securities portfolio through the market disruptions that followed the COVID-19 pandemic. We regularly review the level of unrealized losses on securities. Impairment charges on debt securities are reflected in net gains (losses) on securities only in the case of an issuer credit event. We have no direct investment in any sovereign debt or other securities issued outside of Canada or the United States. Refer to Table 30 – Valuation of Financial Instruments of our MD&A for additional information on significant financial assets and liabilities reported at fair value.
LOANS
Table 10 - Outstanding Loans by Portfolio ($ millions)
2022
2021
Change from 2021
General commercial loans
$
12,430
$
10,895
$
1,535
14 %
Commercial mortgages
7,446 6,952 5,546 3,200
7,039 6,396 5,286 2,871
407 556 260 329
6 9 5
Personal loans and mortgages
Equipment financing and leasing
Real estate project loans
11
Oil and gas production loans
332
414
(82)
(20)
Total Outstanding Loans (1)
$
35,906
$
32,901
$
3,005
9 %
(1) Total loans outstanding by lending sector exclude the allowance for credit losses.
Total loans, excluding the allowance for credit losses, increased 9% ($3.0 billion) compared to last year.
Growth by lending sector was consistent with our ongoing efforts to increase full-service relationships across our national footprint. We delivered very strong growth in our strategically targeted general commercial portfolio, which increased 14% ($1.5 billion) this year, primarily reflecting strong growth in Alberta, British Columbia and Ontario. General commercial lending reflects activity across a broad range of industries, such as manufacturing, construction, transportation, retail trade, hospitality, healthcare, professional services and wholesale trade. Growth in commercial mortgages of 6% ($407 million) primarily reflected strong new lending volumes in Ontario and British Columbia with high-quality borrowers and exposures consistent with our risk appetite. Personal loans and mortgages increased 9% ($556 million) primarily due to growth in uninsured mortgages, which benefited from strong new origination volumes with prudent loan-to-value ratios and strong average beacon scores. The equipment financing and leasing portfolio increased 5% ($260 million), primarily in Alberta, and was negatively impacted by ongoing supply chain pressures and elevated payouts. Real estate project loan growth of 11% ($329 million) was driven by an increase in project starts in British Columbia and Ontario. Lending in real estate project loans has focused on the strongest tier of our risk appetite, which are borrowers with strong, resilient balance sheets and track records of completing similar projects. Oil and gas production loans, which primarily reflect participation in syndicated facilities that remain within our prudent risk appetite, were down 20% ($82 million), primarily due to an elevated level of payouts and paydowns. Our exposures to oil and gas service and production businesses represent approximately 2% and 1% of total loans, respectively. The shift in the mix of our portfolio (see Figure 2) reflected strong execution against our strategy as we capitalized on full-service client opportunities within our risk appetite and across a broad range of industries. Very strong growth in our strategically targeted general commercial loans increased the proportion of loans to 35% at October 31, 2022, compared to 33% last year. The proportion of loans in equipment financing and leasing decreased to 15% from 16% last year, as new loan growth was negatively impacted by ongoing supply chain pressures and elevated payouts. The proportion of loans in commercial mortgages also decreased to 21%, from 22% last year, and our remaining portfolios remained relatively consistent with the prior year.
Figure 2 - Outstanding Loans by Portfolio (October 31, 2021 in brackets)
28 | CWB Financial Group 2022 Annual Report
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