Insurance claims and related expenses for the quarter were $836 million, an increase of $31 million, or 4%, compared with the third quarter last year reflecting higher current year claims from business growth, partially offset by a decrease in the fair value of investments supporting claims liabilities which resulted in a similar decrease in non-interest income.
Reported non-interest expenses for the quarter were $2,748 million, an increase of $215 million, or 8%, compared with the third quarter last year, reflecting higher spend supporting business growth, including volume-driven and employee-related expenses, and technology and marketing costs, partially offset by prior year charges related to the Greystone acquisition. On an adjusted basis, non-interest expenses increased $240 million, or 10%, compared with the third quarter last year.
The reported and adjusted efficiency ratio for the quarter was 41.8%, compared with 42.0% and 41.6%, respectively, in the third quarter last year.
Quarterly comparison – Q3 2021 vs. Q2 2021
Canadian Retail net income of $2,125 million decreased $57 million, or 3%, compared with the prior quarter, reflecting higher insurance claims, PCL and non-interest expenses, partially offset by revenue growth. The annualized ROE for the quarter was 47.6%, compared with 51.3%, in the prior quarter.
Revenue increased $517 million, or 9%, compared with the prior quarter. Net interest income increased $171 million, or 6%, largely reflecting volume growth and the effect of more days in the third quarter. Average loan volumes increased $13 billion, or 3%, reflecting 2% growth in personal loans and 5% growth in business loans. Average deposit volumes increased $11 billion, or 3%, reflecting 2% growth in personal deposits, 4% growth in business deposits, and a 2% decrease in wealth deposits. Net interest margin was 2.61%, flat to the prior quarter.
Non-interest income increased $346 million, or 11%, reflecting higher fee-based revenue in the wealth and banking businesses, prior quarter premium rebates for customers in the insurance business, and an increase in the fair value of investments supporting claims liabilities which resulted in a similar increase in insurance claims, partially offset by lower transaction revenue in the wealth business.
AUA increased $24 billion, or 5%, and AUM increased $23 billion, or 6%, compared with the prior quarter, reflecting market appreciation and new asset growth.
PCL was $100 million, compared with a recovery of $37 million in the prior quarter. PCL – impaired decreased $37 million, or 19%, primarily reflected in the commercial lending portfolio. PCL – performing was a recovery of $54 million compared with a recovery of $228 million in the prior quarter, reflecting continued improvement in credit conditions. Total PCL as an annualized percentage of credit volume was 0.08%, an increase of 11 bps.
Insurance claims and related expenses for the quarter increased $395 million, or 90%, compared with the prior quarter, reflecting higher current year claims, less favourable prior years’ claims development, an increase in the fair value of investments supporting claims liabilities which resulted in a similar increase in non-interest income, and more severe weather-related events.
Non-interest expenses increased $59 million, or 2%, compared with the prior quarter reflecting higher volume-driven and employee-related expenses.
The efficiency ratio was 41.8%, compared with 44.4%, in the prior quarter.
Year-to-date comparison – Q3 2021 vs. Q3 2020
Canadian Retail reported net income for the nine months ended July 31, 2021 was $6,344 million, an increase of $2,120 million, or 50%, compared with same period last year, reflecting lower PCL and higher revenue, partially offset by higher non-interest expenses. On an adjusted basis, net income increased $2,046 million, or 48%. The reported and adjusted annualized ROE for the period was 48.3%, compared with 31.0% and 31.5%, respectively, in the same period last year.
Revenue for the period was $18,986 million, an increase of $682 million, or 4%, compared with same period last year. Net interest income decreased $184 million, or 2%, reflecting lower deposit margins, partially offset by volume growth. Average loan volumes increased $23 billion, or 5%, reflecting 6% growth in personal loans and 4% growth in business loans. Average deposit volumes increased $66 billion, or 18%, reflecting 13% growth in personal deposits, 24% growth in business deposits, and 28% growth in wealth deposits. Net interest margin was 2.62%, a decrease of 20 bps, reflecting lower rates and changes to balance sheet mix.
Non-interest income increased $866 million, or 9%, reflecting higher transaction and fee-based revenue in the wealth and banking businesses and higher insurance volumes, partially offset by a decrease in the fair value of investments supporting claims liabilities which resulted in a similar decrease in insurance claims and the impact of premium rebates for customers in the insurance business.
PCL was $205 million, a decrease of $2,290 million compared with the same period last year. PCL – impaired was $512 million, a decrease of $545 million, or 52%, primarily in the consumer and commercial lending portfolios, largely related to the continued impact of government economic support programs. PCL – performing was a recovery of $307 million, lower by $1,745 million, reflecting a performing allowance increase in the prior year and an allowance release this year largely related to an improvement in the economic outlook. Total PCL as an annualized percentage of credit volume was 0.06%, a decrease of 70 bps.
Insurance claims and related expenses were $2,057 million, a decrease of $199 million, or 9%, compared with the same period last year, reflecting a decrease in the fair value of investments supporting claims liabilities which resulted in a similar decrease in non-interest income, lower current year claims, more favourable prior years’ claims development, and fewer severe weather-related events.
Reported non-interest expenses were $8,091 million, an increase of $334 million, or 4%, compared with the same period last year. The increase primarily reflects higher spend supporting business growth, including volume-driven and employee-related expenses and technology costs, partially offset by prior year charges related to the Greystone acquisition. On an adjusted basis, non-interest expenses increased $409 million or 5%.
The reported and adjusted efficiency ratios for the period were 42.6%, compared with 42.4% and 42.0%, respectively, for the same period last year.
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