{"id":1531,"date":"2007-11-29T14:53:35","date_gmt":"2007-11-29T18:53:35","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=1531"},"modified":"2007-11-29T14:53:35","modified_gmt":"2007-11-29T18:53:35","slug":"na-tier-1-capital-october-2007","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=1531","title":{"rendered":"NA Tier 1 Capital : October 2007"},"content":{"rendered":"

National Bank has released its Fourth Quarter, 2007, Report<\/a> and Supplementary Information<\/a>; I will analyze this in the same format as was has been recently done for BMO<\/a> and TD<\/a>.<\/p>\n

Step One is to analyze their Tier 1 Capital, reproducing the summary produced last year<\/a> (although NA was not included in last year’s round-up):<\/p>\n

\n\n\n\n\n\n\n\n\n\n
NA\u00a0Capital Structure
\nOctober, 2007
\n& October 2006<\/td>\n<\/tr>\n
\u00a0<\/td>\n2007<\/td>\n2006<\/td>\n<\/tr>\n
Total Tier 1 Capital<\/td>\n4,442<\/td>\n4,674<\/td>\n<\/tr>\n
Common Shareholders’ Equity<\/td>\n95.0%<\/td>\n93.8%<\/td>\n<\/tr>\n
Preferred Shares<\/td>\n9.0%<\/td>\n8.6%<\/td>\n<\/tr>\n
Innovative Tier 1 Capital Instruments<\/td>\n11.4%<\/td>\n12.0%<\/td>\n<\/tr>\n
Non-Controlling Interests in Subsidiaries<\/td>\n0.4%<\/td>\n0.2%<\/td>\n<\/tr>\n
Goodwill<\/td>\n-15.8%<\/td>\n-14.6%<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Next, the issuance capacity (from\u00a0Part 3 of last year’s series):<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n
NA
\nTier 1 Issuance Capacity
\nOctober 2007
\n& October 2006<\/td>\n<\/tr>\n
\u00a0<\/td>\n2007<\/td>\n2006<\/td>\n<\/tr>\n
Equity Capital<\/td>\n(A)<\/td>\n3,534<\/td>\n3,712<\/td>\n<\/tr>\n
Non-Equity Tier 1 Limit<\/td>\n(B=A\/3)<\/td>\n1,178<\/td>\n1,237<\/td>\n<\/tr>\n
Innovative Tier 1 Capital<\/td>\n(C)<\/td>\n508<\/td>\n562<\/td>\n<\/tr>\n
Preferred Limit<\/td>\n(D=B-C)<\/td>\n670<\/td>\n675<\/td>\n<\/tr>\n
Preferred Y\/E Actual<\/td>\n(E)<\/td>\n400<\/td>\n400<\/td>\n<\/tr>\n
Post Y\/E Issuance<\/td>\n(F)<\/td>\n0<\/td>\n0<\/td>\n<\/tr>\n
New Issuance Capacity<\/td>\n(G=D-E-F)<\/td>\n270<\/td>\n275<\/td>\n<\/tr>\n
Items A, C & E are taken from the table
\n“Risk-Adjusted Capital Ratios”
\nof the supplementary information;
\nNote that Item A includes Goodwill, non-controlling interest
\nand trading positions (SEE UPDATE, BELOW)
\n<\/em>Item B is as per OSFI Guidelines
\n<\/em>Items D, F & G are my calculations<\/em><\/em><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

We can now show the all important Risk-Weighted Asset Ratios!<\/p>\n

\n\n\n\n\n\n\n\n\n\n
NA
\nRisk-Weighted Asset Ratios
\nOctober 2007
\n& October 2007<\/td>\n<\/tr>\n
\u00a0<\/td>\nNote<\/td>\n2007<\/td>\n2006<\/td>\n<\/tr>\n
Equity Capital<\/td>\nA<\/td>\n3,534<\/td>\n3,712<\/td>\n<\/tr>\n
Risk-Weighted Assets<\/td>\nB<\/td>\n49,336<\/td>\n47,298<\/td>\n<\/tr>\n
Equity\/RWA<\/td>\nC=A\/B<\/td>\n7.16%<\/td>\n7.85%<\/td>\n<\/tr>\n
Tier 1 Ratio<\/td>\nD<\/td>\n9.0%<\/td>\n9.9%<\/td>\n<\/tr>\n
Capital Ratio<\/td>\nE<\/td>\n12.4%<\/td>\n14.0%<\/td>\n<\/tr>\n
A is taken from the table “Issuance Capacity”, above
\nB, D & E are taken from\u00a0the Supplementary Report
\nC is my calculation.<\/em><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Note that, as with BMO and TD, the Equity\/RWA ratio and Tier 1 Ratio have both deteriorated over the year, but for NA the\u00a0Total Capital Ratio has\u00a0also declined. Subordinated Debt<\/a>\u00a0outstanding has declined over the past year.<\/p>\n

It is disappointing to see the deterioration in the Equity\/RWA ratio over the year – I consider this to be a measure of the safety of the preferred shares, as it is the “total risk” of the bank’s assets (as defined by the regulators) divided by the value of capital junior to preferreds (which therefore takes the first loss). It is by no means anything to lose a lot of sleep over, as it still remains strong – the preferreds are better protected than the sub-debt of a lot of global banks – but … geez, the direction’s wrong!<\/p>\n

I won’t discuss the annual results to any great extent – there will be innumerable reports over the next few months released by analysts with a great deal more time to spend on the matter than I have.<\/p>\n

Update<\/strong>: An Assiduous Reader\u00a0pointed out, with great charm and delicacy, that\u00a0I am a bonehead. My initial attempt to calculate “Equity Capital” in the “Issuance Capacity” table was incorrect, as I did not include non-controlling interest in my first go-round. This adjustment has now been made.\u00a0The source data are in the table “Risk-Adjusted Capital Ratios”, page 16 of the Supplementary.<\/p>\n

\n\n\n\n\n\n\n\n\n
NA
\nEquity Capital Calculation
\n2006<\/td>\n<\/tr>\n
Source Description<\/td>\nSource Value<\/td>\n<\/tr>\n
Common Shareholders’ Equity<\/td>\n4,388<\/td>\n<\/tr>\n
Non-Controlling Interest<\/strong><\/td>\n9<\/strong><\/td>\n<\/tr>\n
Less: Goodwill<\/td>\n683<\/td>\n<\/tr>\n
Less: Trading in short positions of own shares (gross)<\/td>\n2<\/td>\n<\/tr>\n
PrefBlog Calculated Total<\/strong><\/td>\n3,712<\/strong><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

and<\/p>\n

\n\n\n\n\n\n\n\n\n
NA
\nEquity Capital Calculation
\n2007<\/td>\n<\/tr>\n
Source Description<\/td>\nSource Value<\/td>\n<\/tr>\n
Common Shareholders’ Equity<\/td>\n4,220<\/td>\n<\/tr>\n
Non-Controlling Interest<\/strong><\/td>\n18<\/strong><\/td>\n<\/tr>\n
Less: Goodwill<\/td>\n703<\/td>\n<\/tr>\n
Less: Trading in short positions of own shares (gross)<\/td>\n1<\/td>\n<\/tr>\n
PrefBlog Calculated Total<\/strong><\/td>\n3,534<\/strong><\/td>\n<\/tr>\n<\/table>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

National Bank has released its Fourth Quarter, 2007, Report and Supplementary Information; I will analyze this in the same format as was has been recently done for BMO and TD. Step One is to analyze …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[],"class_list":["post-1531","post","type-post","status-publish","format-standard","hentry","category-regulatory-capital"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1531","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1531"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1531\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1531"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1531"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1531"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}