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National Bank Releases 2013 Financial Information to Reflect Changes in Accounting Standards and the Common Stock Split

January 31, 2014

This press release provides unaudited financial information prepared in accordance with International Financial Reporting Standards (IFRS), adjusted for year ended October 31, 2013 , to reflect changes in accounting standards and the common stock split. This document is available on the SEDAR website at sedar.com and on the Bank's website at nbc.ca . An additional information document, Supplementary Financial Information - Adjusted to Reflect Changes in Accounting Standards and the Common Stock Split, is also available at nbc.ca . Highlights: Including the changes in accounting standards, adjusted net income for fiscal 2013 was $1,512 million compared to the reported $1,554 million ; Including the changes in accounting standards and the common stock split, adjusted diluted earnings per share stood at $4.31 for fiscal 2013 compared to the reported $8.80 . Highlights Excluding Specified Items (1) : Including the changes in accounting standards, adjusted net income for fiscal 2013 was $1,423 million compared to the reported $1,491 million ; Including the changes in accounting standards and the common stock split, adjusted diluted earnings per share stood at $4.04 for fiscal 2013 compared to the reported $8.41 . MONTREAL , Jan. 31, 2014 /CNW Telbec/ - National Bank of Canada (the Bank) is releasing fiscal 2013 adjusted financial information to reflect changes in accounting standard IAS 19 - Employee Benefits , the application of new accounting standard IFRS 10 - Consolidated Financial Statements and the impact of the common stock split by means of a stock dividend approved by the Board of Directors (the Board) on December 3, 2013 . On February 25, 2014 , the Bank will publish its interim condensed consolidated financial statements for the first quarter ending January 31, 2014 in accordance with IAS 34 - Interim Financial Reporting and provide comparative figures for 2013 to reflect the accounting changes and stock split. The following information is being presented to help users of the Bank's consolidated financial statements better understand the impact of the retrospective application of the accounting standard changes and of the common stock split on the comparative consolidated financial statements for fiscal 2013. This information should be read in conjunction with Note 2 to the audited consolidated financial statements in the 2013 Annual Report (pages 116 and 117) and with the additional information document, Supplementary Financial Information - Adjusted to Reflect Changes in Accounting Standards and the Common Stock Split. In accordance with IFRS, on November 1, 2013 , the Bank adopted the amendments to the accounting standards and adjusted its fiscal 2013 consolidated financial statements following retrospective application of these changes. The Bank also retrospectively adjusted the 2013 common share numbers and per-share calculations to reflect the stock dividend of one common share on each issued and outstanding common share declared on December 3, 2013 . Details of the adjusted financial information are provided below. For the year ended October 31, 2013 (in millions of Canadian dollars) Net income Diluted earnings per share (dollars) Under IFRS Excluding specified items (1) Under IFRS Excluding specified items (1) As reported 1,554 1,491 8.80 8.41 Impact of common stock split (4.40) (4.20) Adjusted after common stock split 1,554 1,491 4.40 4.21 Impact of IAS 19 - Employee Benefits (30) (56) (0.09) (0.17) Impact of IFRS 10 - Consolidated Financial Statements (12) (12) - - Adjusted after changes to accounting standards and common stock split 1,512 1,423 4.31 4.04 (1) The Bank uses certain measures that do not comply with IFRS to assess results. The Bank cautions readers that adjusted measures have no standardized meaning under IFRS and cannot be easily compared with similar measures used by other companies. Adjustments related to IAS 19 - Employee Benefits In June 2011 , the International Accounting Standards Board (IASB) issued an amended version of IAS 19. The amendments introduced significant changes to the recognition of employee benefits, mainly with respect to defined benefit pension plans. For the Bank, the revised standard had an impact on net income and other comprehensive income for the year ended October 31, 2013 and on the consolidated balance sheet as at October 31, 2013 . The impact on net income and other comprehensive income for the year ended October 31, 2013 is summarized below: The expected return on plan assets is no longer used in calculating pension plan expense. The discount rate used to measure the accrued benefit obligation must also be used to measure the return on plan assets. This amendment resulted in a $51 million decrease ( $70 million before deduction of income taxes) in Net income for the year ended October 31, 2013 and a $51 million increase in Other comprehensive income , net of income taxes. During the first quarter of 2013, the Bank made changes to the provisions of its pension plans and other post-retirement plans, specifically regarding the normal retirement age, which reduced past service costs. Revised IAS 19 requires that this reduction be fully recognized in the period in which the plans are changed rather than in subsequent periods. Accordingly, under revised IAS 19, the Bank recognized a $35 million decrease in past service costs ( $26 million net of income taxes presented as a specified item (1) ) in the first quarter of 2013, whereas it had recorded a $6 million decrease ( $5 million net of income taxes) in fiscal 2013 in accordance with the previous accounting standard. These adjustments increased Net Income for the year ended October 31, 2013 by $21 million . As at October 31, 2013 , the impact on the consolidated balance sheet of the amendments to employee benefits translates into a $15 million increase in Other assets , a $6 million decrease in Other liabilities and a $21 million increase in Retained earnings . The amendments to IAS 19 had no impact on the consolidated balance sheet as at November 1, 2012 . Adjustments related to IFRS 10 - Consolidated Financial Statements IFRS 10 replaces the consolidation guidance formerly set out in IAS 27 - Consolidated and Separate Financial Statements and interpretation SIC-12 - Consolidation - Special Purpose Entities , by establishing a single consolidation model based on control that applies to all interests held in all types of entities (investees). According to IFRS 10, control is based on the concepts of decision-making authority regarding the investee's relevant activities, exposure or rights to variable returns from its involvement with the investee, and the ability to use its power to affect the amount of returns. An entity must consolidate the entities it controls and present consolidated financial statements. The Bank has applied IFRS 10 retrospectively, which has resulted in the deconsolidation of NBC Capital Trust (the Trust). Under IFRS 10, the Bank does not control the Trust because the Bank's interest does not expose it to variable returns. The retrospective application of this standard translates into a $12 million decrease in Net income for the year ended October 31, 2013 and into a $225 million increase in Deposits , a $4 million increase in Other liabilities and a $229 million decrease in Non-controlling interests on the consolidated balance sheets as at November 1, 2012 , and October 31, 2013 . Adjustments related to the common stock split by means of a stock dividend On December 3, 2013 , the Board declared a stock dividend of one common share on each issued and outstanding common share, payable on February 13, 2014 to common shareholders of record on February 6, 2014 . The effect is the same as a two-for-one split of common shares. All common share numbers and per-share calculations have been adjusted retrospectively to reflect the stock dividend. Financial information provided The financial information provided in this press release reflects the adjustments made by the Bank for the year ended October 31, 2013 and includes the following: 1) Condensed consolidated quarterly results; 2) Condensed consolidated quarterly cumulative and annual results; and 3) Condensed consolidated balance sheets. 1) Condensed Consolidated Quarterly Results Quarter ended January 31, 2013 April 30, 2013 July 31, 2013 October 31, 2013 (unaudited) (millions of Canadian dollars) Reported Adjustments Adjusted Reported Adjustments Adjusted Reported Adjustments Adjusted Reported Adjustments Adjusted Condensed consolidated results excluding specified items (1) Net interest income 599 (3) 596 625 (3) 622 636 (3) 633 598 (3) 595 Non-interest income 626 - 626 626 - 626 658 - 658 665 - 665 Total revenues 1,225 (3) 1,222 1,251 (3) 1,248 1,294 (3) 1,291 1,263 (3) 1,260 Non-interest expenses 747 19 766 769 19 788 783 19 802 772 19 791 Provisions for credit losses 32 - 32 53 - 53 48 - 48 48 - 48 Income before income taxes (recovery) 446 (22) 424 429 (22) 407 463 (22) 441 443 (22) 421 Income taxes (recovery) 85 (5) 80 60 (5) 55 72 (5) 67 73 (5) 68 Net income excluding specified items 361 (17) 344 369 (17) 352 391 (17) 374 370 (17) 353 Specified items after income taxes 3 26 29 65 - 65 28 - 28 (33) - (33) Net income 364 9 373 434 (17) 417 419 (17) 402 337 (17) 320 Excluding specified items (1) Earnings per share (dollars) Basic 2.04 (1.06) 0.98 2.10 (1.09) 1.01 2.23 (1.16) 1.07 2.11 (1.10) 1.01 Diluted 2.02 (1.05) 0.97 2.08 (1.08) 1.00 2.22 (1.15) 1.07 2.09 (1.09) 1.00 Condensed consolidated results under IFRS Net interest income 599 (3) 596 623 (3) 620 632 (3) 629 595 (3) 592 Non-interest income 636 - 636 763 - 763 656 - 656 659 - 659 Total revenues 1,235 (3) 1,232 1,386 (3) 1,383 1,288 (3) 1,285 1,254 (3) 1,251 Non-interest expenses 753 (16) 737 815 19 834 789 19 808 808 19 827 Provisions for credit losses 32 - 32 53 - 53 48 - 48 48 - 48 Income before income taxes (recovery) 450 13 463 518 (22) 496 451 (22) 429 398 (22) 376 Income taxes (recovery) 86 4 90 84 (5) 79 32 (5) 27 61 (5) 56 Net income 364 9 373 434 (17) 417 419 (17) 402 337 (17) 320 Net income attributable to Bank shareholders 344 12 356 416 (14) 402 401 (14) 387 318 (14) 304 Non-controlling interests 20 (3) 17 18 (3) 15 18 (3) 15 19 (3) 16 364 9 373 434 (17) 417 419 (17) 402 337 (17) 320 Weighted average basic number of common shares outstanding (thousands) 161,585 161,585 323,170 162,278 162,278 324,556 162,386 162,386 324,772 162,687 162,687 325,374 Weighted average diluted number of common shares outstanding (thousands) 163,045 163,045 326,090 163,538 163,538 327,076 163,588 163,588 327,176 164,297 164,296 328,593 Earnings per share (dollars) Basic 2.05 (0.99) 1.06 2.50 (1.29) 1.21 2.41 (1.25) 1.16 1.91 (1.00) 0.91 Diluted 2.03 (0.98) 1.05 2.49 (1.29) 1.20 2.39 (1.23) 1.16 1.89 (0.99) 0.90 Condensed consolidated comprehensive income under IFRS Net income 364 9 373 434 (17) 417 419 (17) 402 337 (17) 320 Other comprehensive income, net of income taxes Items that may be subsequently reclassified to net income (5) - (5) 34 - 34 (79) - (79) 10 - 10 Item that will not be subsequently reclassified to net income Actuarial gains and losses on employee benefit plans 10 12 22 (43) 13 (30) 151 13 164 (65) 13 (52) Share in the other comprehensive income of associates and joint ventures (1) - (1) 1 - 1 - - - (1) - (1) Comprehensive income 368 21 389 426 (4) 422 491 (4) 487 281 (4) 277 (1) The Bank uses certain measures that do not comply with IFRS to assess results. The Bank cautions readers that adjusted measures have no standardized meaning under IFRS and cannot be easily compared with similar measures used by other companies. 2) Condensed Consolidated Quarterly Cumulative and Annual Results Quarter ended January 31, 2013 Six months ended April 30, 2013 Nine months ended July 31, 2013 Year ended October 31, 2013 (unaudited) (millions of Canadian dollars) Reported Adjustments Adjusted Reported Adjustments Adjusted Reported Adjustments Adjusted Reported Adjustments Adjusted Condensed consolidated results excluding specified items (1) Net interest income 599 (3) 596 1,224 (6) 1,218 1,860 (9) 1,851 2,458 (12) 2,446 Non-interest income 626 - 626 1,252 - 1,252 1,910 - 1,910 2,575 - 2,575 Total revenues 1,225 (3) 1,222 2,476 (6) 2,470 3,770 (9) 3,761 5,033 (12) 5,021 Non-interest expenses 747 19 766 1,516 38 1,554 2,299 57 2,356 3,071 76 3,147 Provisions for credit losses 32 - 32 85 - 85 133 - 133 181 - 181 Income before income taxes (recovery) 446 (22) 424 875 (44) 831 1,338 (66) 1,272 1,781 (88) 1,693 Income taxes (recovery) 85 (5) 80 145 (10) 135 217 (15) 202 290 (20) 270 Net income excluding specified items 361 (17) 344 730 (34) 696 1,121 (51) 1,070 1,491 (68) 1,423 Specified items after income taxes (1) 3 26 29 68 26 94 96 26 122 63 26 89 Net income 364 9 373 798 (8) 790 1,217 (25) 1,192 1,554 (42) 1,512 Excluding specified items (1) Earnings per share (dollars) Basic 2.04 (1.06) 0.98 4.14 (2.15) 1.99 6.37 (3.31) 3.06 8.48 (4.41) 4.07 Diluted 2.02 (1.05) 0.97 4.10 (2.13) 1.97 6.32 (3.28) 3.04 8.41 (4.37) 4.04 Condensed consolidated results under IFRS Net interest income 599 (3) 596 1,222 (6) 1,216 1,854 (9) 1,845 2,449 (12) 2,437 Non-interest income 636 - 636 1,399 - 1,399 2,055 - 2,055 2,714 - 2,714 Total revenues 1,235 (3) 1,232 2,621 (6) 2,615 3,909 (9) 3,900 5,163 (12) 5,151 Non-interest expenses 753 (16) 737 1,568 3 1,571 2,357 22 2,379 3,165 41 3,206 Provisions for credit losses 32 - 32 85 - 85 133 - 133 181 - 181 Income before income taxes (recovery) 450 13 463 968 (9) 959 1,419 (31) 1,388 1,817 (53) 1,764 Income taxes (recovery) 86 4 90 170 (1) 169 202 (6) 196 263 (11) 252 Net income 364 9 373 798 (8) 790 1,217 (25) 1,192 1,554 (42) 1,512 Net income attributable to Bank shareholders 344 12 356 760 (2) 758 1,161 (16) 1,145 1,479 (30) 1,449 Non-controlling interests 20 (3) 17 38 (6) 32 56 (9) 47 75 (12) 63 364 9 373 798 (8) 790 1,217 (25) 1,192 1,554 (42) 1,512 Weighted average basic number of common shares outstanding (thousands) 161,585 161,585 323,170 161,926 161,926 323,852 162,081 162,081 324,162 162,234 162,234 324,468 Weighted average diluted number of common shares outstanding (thousands) 163,045 163,045 326,090 163,336 163,335 326,671 163,349 163,350 326,699 163,524 163,524 327,048 Earnings per share (dollars) Basic 2.05 (0.99) 1.06 4.55 (2.28) 2.27 6.96 (3.53) 3.43 8.87 (4.53) 4.34 Diluted 2.03 (0.98) 1.05 4.52 (2.27) 2.25 6.91 (3.50) 3.41 8.80 (4.49) 4.31 Condensed consolidated comprehensive income under IFRS Net income 364 9 373 798 (8) 790 1,217 (25) 1,192 1,554 (42) 1,512 Other comprehensive income, net of income taxes Items that may be subsequently reclassified to net income (5) - (5) 29 - 29 (50) - (50) (40) - (40) Item that will not be subsequently reclassified to net income Actuarial gains and losses on employee benefit plans 10 12 22 (33) 25 (8) 118 38 156 53 51 104 Share in the other comprehensive income of associates and joint ventures (1) - (1) - - - - - - (1) - (1) Comprehensive income 368 21 389 794 17 811 1,285 13 1,298 1,566 9 1,575 (1) The Bank uses certain measures that do not comply with IFRS to assess results. The Bank cautions readers that adjusted measures have no standardized meaning under IFRS and cannot be easily compared with similar measures used by other companies. 3) Condensed Consolidated Balance Sheets (unaudited) (millions of Canadian dollars) Reported as at October 31, 2013 Adjustments Adjusted as at October 31, 2013 Reported as at October 31 , 2012 Adjustments Adjusted as at November 1 , 2012 Assets Cash and deposits with financial institutions 3,596 - 3,596 3,249 - 3,249 Securities 53,744 - 53,744 54,898 - 54,898 Securities purchased under reverse repurchase agreements and securities borrowed 21,449 - 21,449 15,529 - 15,529 Loans and acceptances 97,338 - 97,338 90,922 - 90,922 Other 12,077 15 12,092 13,305 - 13,305 188,204 15 188,219 177,903 - 177,903 Liabilities Deposits 101,886 225 102,111 93,249 225 93,474 Other 74,731 (2) 74,729 73,944 4 73,948 Subordinated debt 2,426 - 2,426 2,470 - 2,470 179,043 223 179,266 169,663 229 169,892 Equity Equity attributable to the Bank's shareholders Preferred shares 677 - 677 762 - 762 Common shares 2,160 - 2,160 2,054 - 2,054 Contributed surplus 58 - 58 58 - 58 Retained earnings 5,034 21 5,055 4,091 - 4,091 Accumulated other comprehensive income 214 - 214 255 - 255 8,143 21 8,164 7,220 - 7,220 Non-controlling interests 1,018 (229) 789 1,020 (229) 791 9,161 (208) 8,953 8,240 (229) 8,011 188,204 15 188,219 177,903 - 177,903 Caution Regarding Forward-Looking Statements From time to time, National Bank of Canada (the Bank) makes written and oral forward-looking statements, such as those contained in the Major Economic Trends and the Outlook for National Bank sections of the 2013 Annual Report, in other filings with Canadian securities regulators, and in other communications, for the purpose of describing the economic environment in which the Bank will operate during fiscal 2014 and the objectives it has set for itself for that period. These forward-looking statements are made in accordance with current securities legislation. They include, among others, statements with respect to the economy-particularly the Canadian and U.S. economies-market changes, observations regarding the Bank's objectives and its strategies for achieving them, Bank projected financial returns and certain risks faced by the Bank. These forward-looking statements are typically identified by future or conditional verbs or words such as "outlook," "believe," "anticipate," "estimate," "project," "expect," "intend," "plan," and similar terms and expressions. By their very nature, such forward-looking statements require assumptions to be made and involve inherent risks and uncertainties, both general and specific. Assumptions about the performance of the Canadian and U.S. economies in 2014 and how that will affect the Bank's business are among the main factors considered in setting the Bank's strategic priorities and objectives and in determining its financial targets, including provisions for credit losses. In determining its expectations for economic growth, both broadly and in the financial services sector in particular, the Bank primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies. There is a strong possibility that express or implied projections contained in these forward-looking statements will not materialize or will not be accurate. The Bank recommends that readers not place undue reliance on these statements, as a number of factors, many of which are beyond the Bank's control, could cause actual future results, conditions, actions or events to differ significantly from the targets, expectations, estimates or intentions expressed in the forward-looking statements. These factors include strategic risk, credit risk, market risk, liquidity risk, operational risk, regulatory risk, reputation risk, and environmental risk (all of which are described in greater detail in the Risk Management section that begins on page 60 of the 2013 Annual Report); the general economic environment and financial market conditions in Canada, the United States and certain other countries in which the Bank conducts business, including the effects of uncertainty surrounding U.S. government debt negotiations; regulatory changes affecting the Bank's business, capital and liquidity; the situation with respect to the restructured notes of the master asset vehicle (MAV) conduits, in particular the realizable value of underlying assets; changes in the accounting policies the Bank uses to report its financial condition, including uncertainties associated with assumptions and critical accounting estimates; tax laws in the countries in which the Bank operates, primarily Canada and the United States; and changes to capital and liquidity guidelines and to the manner in which they are to be presented and interpreted. The foregoing list of risk factors is not exhaustive. Additional information about these factors can be found in the Risk Management and Other Risk Factors sections of the 2013 Annual Report. Investors and others who base themselves on the Bank's forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. The Bank also cautions readers not to place undue reliance on these forward-looking statements. The forward-looking information contained in this document is presented for the purpose of interpreting the information contained herein and may not be appropriate for other purposes. About National Bank of Canada With $188 billion in assets as at October 31, 2013 , National Bank of Canada ( nbc.ca ), together with its subsidiaries, forms one of Canada's leading integrated financial groups, and was named among the 20 strongest banks in the world by Bloomberg Markets magazine . The Bank has close to 20,000 employees and is widely recognized as a top employer. Its securities are listed on the Toronto Stock Exchange (TSX: NA). Follow the Bank's activities via social media and learn more about its extensive community involvement at clearfacts.ca and commitment.nationalbank.ca . SOURCE National Bank of Canada


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