BNS has released its Second 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 analyze their Tier 1 Capital, reproducing the prior format:
| BNS Capital Structure October, 2007 & April, 2008 |
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| 4Q07 | 2Q08 | |
| Total Tier 1 Capital | 20,225 | 21,073 |
| Common Shareholders’ Equity | 81.5% | 83.9% |
| Preferred Shares | 8.1% | 10.5% |
| Innovative Tier 1 Capital Instruments | 13.6% | 13.0% |
| Non-Controlling Interests in Subsidiaries | 2.5% | 2.8% |
| Goodwill | -5.6% | -10.3% |
Next, the issuance capacity (from Part 3 of the introductory series):
| BNS Tier 1 Issuance Capacity October 2007 & April 2008 |
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| 4Q07 | 2Q08 | ||
| Equity Capital | (A) | 15,840 | 16,113 |
| Non-Equity Tier 1 Limit | (B=A/3), 4Q07 (B=0.428*A), 2Q08 |
5,280 | 6,896 |
| Innovative Tier 1 Capital | (C) | 2,750 | 2,750 |
| Preferred Limit | (D=B-C) | 2,530 | 4,146 |
| Preferred Actual | (E) | 1,635 | 2,210 |
| New Issuance Capacity | (F=D-E) | 895 | 1,936 |
| Items A, C & E are taken from the table “Regulatory Capital” of the supplementary information; Note that Item A includes Goodwill, FX losses, “Other Capital Deductions” and non-controlling interest Item B is as per OSFI Guidelines; the limit was recently increased. Items D & F are my calculations |
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and the all important Risk-Weighted Asset Ratios!
| BNS Risk-Weighted Asset Ratios October 2007 & April 2008 |
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| Note | 2007 | 2Q08 | |
| Equity Capital | A | 15,840 | 16,113 |
| Risk-Weighted Assets | B | 218,300 | 218,900 |
| Equity/RWA | C=A/B | 7.26% | 7.36% |
| Tier 1 Ratio | D | 9.3% | 9.6% |
| Capital Ratio | E | 10.5% | 11.7% |
| Assets to Capital Multiple | F | 18.22x | 17.68x |
| A is taken from the table “Issuance Capacity”, above B, D & E are taken from BNS’s Supplementary Report C is my calculation. F is from OSFI (4Q07) and BNS’s Supplementary Report (2Q08) of total assets ($452.6-billion) divided by total capital ($25.588-billion) |
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