{"id":4316,"date":"2008-12-04T15:46:46","date_gmt":"2008-12-04T19:46:46","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=4316"},"modified":"2008-12-04T15:46:46","modified_gmt":"2008-12-04T19:46:46","slug":"na-capitalization-4q08","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=4316","title":{"rendered":"NA Capitalization: 4Q08"},"content":{"rendered":"

NA has released<\/a> its Fourth Quarter 2008 Report<\/a> and Supplementary Package<\/a>, so it’s time to recalculate how much room they have to issue new preferred shares – assuming they want to!<\/p>\n

Step One is to analyze their Tier 1 Capital, reproducing the prior format<\/a>:<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n
NA Capital Structure
\nOctober, 2007
\n& October, 2008<\/td>\n<\/tr>\n
 <\/td>\n4Q07<\/td>\n4Q08<\/td>\n<\/tr>\n
Total Tier 1 Capital<\/td>\n4,442<\/td>\n5,480<\/td>\n<\/tr>\n
Common Shareholders’ Equity<\/td>\n95.0%<\/td>\n86.2%<\/td>\n<\/tr>\n
Preferred Shares<\/td>\n9.0%<\/td>\n14.1%<\/td>\n<\/tr>\n
Innovative Tier 1 Capital Instruments<\/td>\n11.4%<\/td>\n15.1%<\/td>\n<\/tr>\n
Non-Controlling Interests in Subsidiaries<\/td>\n0.4%<\/td>\n0.3%<\/td>\n<\/tr>\n
Goodwill<\/td>\n-15.8%<\/td>\n-13.5%<\/td>\n<\/tr>\n
Miscellaneous<\/td>\nNA<\/td>\n-2.3%<\/td>\n<\/tr>\n
Shareholders’ equity includes ‘Foreign Currency Translation Adjustment’<\/i>
‘Miscellaneous’ includes ‘unrealized gain of available for sale equity securities’ and ‘securitization related deductions’<\/i><\/td>\n<\/table>\n<\/div>\n

Next, the issuance capacity (from Part 3 of the introductory series<\/a>):<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n
NA
\nTier 1 Issuance Capacity
\nOctober 2007
\n& October 2008<\/td>\n<\/tr>\n
 <\/td>\n4Q07<\/td>\n4Q08<\/td>\n<\/tr>\n
Equity Capital<\/td>\n(A)<\/td>\n3,534<\/td>\n3,878<\/td>\n<\/tr>\n
Non-Equity Tier 1 Limit<\/td>\n(B=A\/3), 4Q07
(B=0.666*A), 4Q08<\/td>\n		1,178<\/td>\n2,585<\/td>\n<\/tr>\n
Innovative Tier 1 Capital<\/td>\n(C)<\/td>\n508<\/td>\n828<\/td>\n<\/tr>\n
Preferred Limit<\/td>\n(D=B-C)<\/td>\n670<\/td>\n1,757<\/td>\n<\/tr>\n
Preferred Actual<\/td>\n(E)<\/td>\n400<\/td>\n774<\/td>\n<\/tr>\n
New Issuance Capacity<\/td>\n(F=D-E)<\/td>\n270<\/td>\n983<\/td>\n<\/tr>\n
Items A, C & E are taken from the table
\n“Risk Adjusted Capital Ratiosl”
\nof the supplementary information;
\nNote that Item A includes everything except preferred shares and innovative capital instruments<\/em>

\nItem B is as per OSFI Guidelines; the limit was recently increased<\/a>.
Items D & F are my calculations<\/em><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

and the all important Risk-Weighted Asset Ratios!<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n
NA
\nRisk-Weighted Asset Ratios
\nOctober 2007
\n& October 2008<\/td>\n<\/tr>\n
 <\/td>\nNote<\/td>\n2007<\/td>\n4Q08<\/td>\n<\/tr>\n
Equity Capital<\/td>\nA<\/td>\n3,534<\/td>\n3,878<\/td>\n<\/tr>\n
Risk-Weighted Assets<\/td>\nB<\/td>\n49,336<\/td>\n58,069<\/td>\n<\/tr>\n
Equity\/RWA<\/td>\nC=A\/B<\/td>\n7.16%<\/td>\n6.67%<\/td>\n<\/tr>\n
Tier 1 Ratio<\/td>\nD<\/td>\n9.0% <\/td>\n9.4% <\/td>\n<\/tr>\n
Capital Ratio<\/td>\nE<\/td>\n12.4%<\/td>\n13.2%<\/td>\n<\/tr>\n
Assets to Capital Multiple<\/td>\nF<\/td>\n18.6x<\/td>\n16.7x<\/td>\n<\/tr>\n
A is taken from the table “Issuance Capacity”, above
\nB, D & E are taken from RY’s Supplementary Report
\nC is my calculation
\nF is taken from the OSFI site<\/a> for 4Q07. The 4Q08 figure is approximated by subtracting goodwill of 740 from total assets of 129,332 to obtain adjusted assets of 128,592 and dividing by 7,679 total capital.<\/em><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

National Bank does not disclose its Assets-to-Capital Multiple. Their Report to Shareholders simply states (Note 4):<\/p>\n

In addition to regulatory capital ratios, banks are expected to meet an assets-to-capital multiple test. The assets-to-capital multiple is calculated by dividing a bank\u2019s total assets, including specified off-balance sheet items, by its total capital. Under this test, total assets should not be greater than 23 times the total capital. The Bank met the assets-to-capital multiple test in the third quarter of 2008.<\/p><\/blockquote>\n

They’re reducing their leverage a little, but not by enough. Equity\/RWA is now less than 7% (they report 6.43% on page 3 of the supplementary data; it’s not clear how that is calculated) … if they want to eliminated the (low) discount on their Pfd-1(low) preferred shares, they have to issue some equity. Which is not to say that their prefs are unduly risky, of course … but it does mean they have greater credit risk than their better capitalized competitors.<\/p>\n","protected":false},"excerpt":{"rendered":"

NA has released its Fourth Quarter 2008 Report and Supplementary Package, so it’s time to recalculate how much room they have to issue new preferred shares – assuming they want to! Step One is to …<\/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-4316","post","type-post","status-publish","format-standard","hentry","category-regulatory-capital"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/4316","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=4316"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/4316\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4316"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4316"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4316"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}