CWBFG Annual Report 2023

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

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