Management maintains the asset liability structure and interest rate sensitivity within the Bank's established policies through pricing and product initiatives, as well as the use of interest rate swaps and other appropriate strategies.
Outlook for net interest margin
Looking forward, improvement in net interest margin over this quarter is unlikely in the absence of increases in the prime lending interest rate and/or a persistent steepening of the interest rate curve. Management maintains its strategic focus on mitigating the earnings impact of ongoing margin pressure through an emphasis on achieving higher relative growth in better yielding loan portfolios with an acceptable risk profile, improving the deposit mix to lower the overall cost of funds, prudently managing liquidity levels and increasing contributions from other income sources.
Q3 2013 vs. Q3 2012
Third quarter other income of $23.0 million was relatively consistent with the same quarter last year, but the composition varied considerably. Negative net insurance revenues of $2.2 million represented an $8.5 million decline as a result of the significant impact on net claims expense from Alberta's catastrophic floods and severe hailstorms. Net gains on securities of $7.0 million increased $5.1 million mainly reflecting the realization of gains owing to unexpectedly strong performance within the Bank's portfolio of common shares. Based on the level of gains realized and the current composition of the securities portfolio, including a significant increase toward quarter-end in the level of unrealized losses on preferred shares, net gains on securities are not expected to provide a meaningful source of revenue in the fourth quarter. Trust and wealth management services revenue was up 49% ($2.2 million), primarily reflecting the addition of McLean & Partners, which contributed $2.0 million of the overall increase. The 'other' category of other income increased 28% ($0.6 million) owing to gains realized on the sale of $66 million of insured residential mortgages. Credit related fee income increased 9% ($0.5 million).
Q3 2013 vs. Q2 2013
Other income was down 2% ($0.4 million) compared to the previous quarter as an $8.4 million decline in net insurance revenues, reflecting Alberta weather events, was largely offset by the combination of a $3.9 million increase in net gains on securities, a $2.6 million higher contribution from the 'other' component of other income and $1.5 million growth in trust and wealth management revenue. The aforementioned gains realized on the sale of residential mortgages accounted for the increase in 'other' other income, while higher trust and wealth management revenue was driven by the addition of McLean & Partners. Credit related fee income increased 8% ($0.4 million), while retail services fees were 14% ($0.4 million) lower.
YTD 2013 vs. YTD 2012
Year-to-date other income of $68.8 million was up 11% ($6.8 million) compared to 2012 driven by strong, double-digit increases in all categories except net insurance revenues and foreign exchange gains. Net insurance revenues were $7.2 million lower as growth in net earned premiums was more than offset by claims expense mainly related to the Alberta floods and severe hailstorms. Net gains on securities increased 82% ($5.7 million). Trust and wealth management income was up 20% ($2.9 million) inclusive of a $2.0 million contribution from McLean & Partners. The elimination of charges for contingent consideration fair value changes accounted for $2.5 million of the positive difference in other income compared to last year. Credit related fee income increased 11% ($1.5 million), in line with overall loan growth. The 'other' category of other income was up 26% ($0.8 million) mainly driven by gains recognized on the sale of insured residential mortgages, while retail services contributions increased 10% ($0.7 million).
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