Adjusted Net Income
Adjusted net income was $997 million for the second quarter of 2013, up $15 million or 2% from a year ago. Adjusted earnings per share were $1.46, up 1% from $1.44 a year ago.
Management has designated certain amounts as adjusting items and has adjusted GAAP results so that we can discuss and present financial results without the effects of adjusting items to facilitate understanding of business performance and related trends. Management assesses performance on a GAAP basis and on an adjusted basis and considers both to be useful in the assessment of underlying business performance. Presenting results on both bases provides readers with a better understanding of how management assesses results. Adjusted results and measures are non-GAAP and, together with items excluded in determining adjusted results, are disclosed in more detail in the Non-GAAP Measures section, along with comments on the uses and limitations of such measures.
Items excluded from second quarter 2013 results in the determination of adjusted results totalled $22 million of net loss or $0.04 per share and were comprised of:
-- the $73 million after-tax net benefit for credit-related items in respect of the acquired Marshall & Ilsley (M&I) performing loan portfolio, consisting of $176 million for the recognition in net interest income of a portion of the credit mark on the portfolio (including $68 million for the release of the credit mark related to early repayment of loans), net of a $57 million provision for credit losses (comprised of specific provisions of $65 million and a decrease in the collective allowance of $8 million) and related income taxes of $46 million. These credit-related items in respect of the acquired M&I performing loan portfolio can significantly impact both net interest income and the provision for credit losses in different periods over the life of the acquired M&I performing loan portfolio;-- costs of $50 million ($31 million after tax) for integration of M&I including amounts related to system conversions, restructuring and other employee-related charges, consulting fees and marketing costs related to rebranding activities;-- a restructuring charge of $82 million ($59 million after tax) to align our cost structure with the current and future business environment. This action is a part of the broader effort underway to improve productivity in the bank;-- a decrease in the collective allowance for credit losses of $22 million ($11 million after tax) on loans other than the M&I purchased loan portfolio;-- the $6 million before and after-tax benefit from run-off structured credit activities; and-- the amortization of acquisition-related intangible assets of $31 million ($22 million after tax).
All of the above adjusting items were recorded in Corporate Services except the amortization of acquisition-related intangible assets, which is charged to the operating groups.
The impact of adjusting items for comparative periods is summarized in the Non-GAAP Measures section.
The foregoing sections contain forward-looking statements. Please see the Caution Regarding Forward-Looking Statements that follows.
The foregoing sections contain adjusted results and measures, which are non-GAAP. Please see the Non-GAAP Measures section.
Management's Discussion and Analysis
Management's Discussion and Analysis (MD&A) commentary is as of May 29, 2013. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from financial statements prepared in accordance with International Financial Reporting Standards (IFRS). References to GAAP mean IFRS, unless indicated otherwise. The MD&A should be read in conjunction with the unaudited interim consolidated financial statements for the period ended April 30, 2013, as well as the audited consolidated financial statements for the year ended October 31, 2012, and Management's Discussion and Analysis for fiscal 2012. The material that precedes this section comprises part of this MD&A.