FIGURE 1
FIGURE 2
FIGURE 3
DIVERSIFYING LOANS BY PROVINCE (%)
DIVERSIFYING LOANS BY LENDING SECTOR (%)
FUNDING DIVERSIFICATION (%)
2022
2022
14% Branch demand and notice deposits 5YR CAGR
2022
15% General Commercial Loans 5YR CAGR
14% Ontario Loans 5YR CAGR
40
35
31
1
27
33
33
1
9
18
18
24
2017
2017
17
2017
17
5
19
9
10
21
35
20
17
15
13
34
33
13
12
21
19
British Columbia Alberta Ontario Remainder
General commercial loans Commercial mortgages
Branch demand and notice Branch term Broker term Sub debt and capital markets Securitization
Personal loans and mortgages Equipment financing and leasing Real estate project loans Oil and gas production loans
WE ARE WELL POSITIONED FOR POTENTIAL VOLATILITY IN ECONOMIC CONDITIONS
Economic conditions deteriorated as this year progressed. Rising commodity prices, supply chain pressures, labour shortages and strong global and domestic demand drove persistent levels of inflation. In response, the rapid and significant increase in market interest rates began to cool economic growth and fuel the potential for recessionary conditions to emerge in Canada. Through the volatile economic conditions over the last two years, we have followed a disciplined lending model within a prudent credit risk appetite. We have ended the current year at a historically low level of gross impaired loans, which represented less than 0.50% of total loans, and our provisions for credit losses and write- offs remain well below historical averages (figure 4). While our targeted approach for loan growth has delivered very strong credit performance to date, it has put downward pressure on our net interest margin. In the rising interest rate environment, the overall yield on our loan portfolio has not maintained pace with the increase in our deposit costs. We expect this impact to begin to reverse as market interest rates
and deposit costs stabilize, and we will not deviate from our prudent credit risk management approach to accelerate an expansion of our net interest margin. Over the past several years, we have been strategically focused on diversifying our sources of funding (figure 3). Very strong growth of branch-raised deposits (1) , and continued maturation of our debt capital market and securitization funding channels have delivered a significant improvement in the diversity of our funding. Our strategic effort to convert our clients from single product to broader full-service relationships has supported 14% annual growth of branch-raised deposits (1) over the last five years, while we have grown total loans 9% annually over the same period. We have been prudently managing our regulatory capital ratios through the use of our at-the-market common equity distribution program. This has enabled us to balance delivering continued strong full-service client growth while also maintaining a conservative capital position to support us through potential volatility in economic conditions.
Gross impaired loans as a % of gross loans Write-offs as a % of average loans (1) Our five-year and ten-year average write-offs as a percentage of average loans (1) are 17 and 18 basis points, respectively.
STRONG CREDIT QUALITY %
FIGURE 4
0.90
0.60
0.30
0.00
11
12 13 14 15 16
17 18 19 20 21
22
(1) Non-GAAP measure – refer to definitions and detail provided on page 16.
CWB Financial Group 2022 Annual Report | 3
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