6. LOANS, IMPAIRED LOANS AND ALLOWANCE FOR CREDIT LOSSES LOANS AT AMORTIZED COST
Loans, including leases, which are measured at amortized cost and stated net of unearned income, unamortized premiums or discounts and allowance for credit losses, are originated or purchased with the objective of collecting contractual cash flows and generating cash flows that satisfy the requirements of the SPPI test. Loan fees integral to the yield, net of transaction costs, are amortized to interest income using the effective interest method.
The composition of our loan portfolio by geographic region and industry sector follows:
Composition Percentage
Oct. 31 2023
Oct. 31 2022
($ millions)
BC
AB
ON
SK
QC
MB
Other
Total
Personal (1)
$
1,627
$
1,943
$
2,955
$
276 $
- $
157 $
160 $
7,118
19 %
19 %
Business General commercial loans
4,024 3,695
4,029 2,468 1,517
4,007
514 224 467
429
419 133 282
259
13,681
37 19 16
35 21 15
Commercial mortgages
526
60
-
7,106 5,722 3,098
Equipment financing and leasing (2)
903
1,366
794
393
Real estate project loans
1,605
756 413
577
27
66
67
- -
8 1
9 1
Oil and gas production loans
72
-
-
-
-
485
10,299
9,183
6,476
1,232
1,349
901
652
30,092
81
81
Total (3)
$ 11,926
$ 11,126
$
9,431
$
1,508
$ 1,349 $
1,058
$
812
$ 37,210
100 %
100 %
Composition Percentage October 31, 2023
32 % 33 %
30 % 31 %
25 % 24 %
4 % 4 %
4 % 3 %
3 % 3 %
2 %
100 % 100 %
October 31, 2022
2 %
(1) Includes mortgages securitized through the National Housing Act Mortgage Backed Securities program reported on-balance sheet of $1,350 (October 31, 2022 – $1,386) (see Note 6). (2) Includes securitized leases and loans reported on-balance sheet of $2,219 (October 31, 2022 – $2,125) (see Note 7). (3) This table does not include an allocation of the allowance for credit losses.
CREDIT QUALITY Internal Risk Ratings
Within our loan portfolios, borrowers are assigned a borrower risk rating (BRR) that reflects the credit quality of the obligor using industry and sector-specific risk models and expert credit judgment. BRRs are assessed and assigned at the time of loan origination and reviewed at least annually. More frequent reviews are conducted for borrowers with weaker risk ratings, borrowers that trigger a review based on adverse changes in financial performance and borrowers requiring or requesting changes to credit facilities. Each BRR has a PD calibrated against it, which is estimated based on our historical loss experience for each risk segment or risk rating level, adjusted for forward-looking information. Our BRR scale broadly aligns to external ratings as follows:
Description
CWB Rating Category
Standard & Poor’s
Moody’s Investor Services
Investment grade or low risk
1 to 6M 6L to 8L
AAA to BBB- BB+ to CCC+
Aaa to Baa3 Ba1 to Caa1
Non-investment grade or medium risk
Watchlist or high risk
9H to 10L
CCC and below
Caa2 and below
Impaired
11 to 12
Default
Default
CWB Financial Group 2023 Annual Report | 75
Powered by FlippingBook