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Investment in Associates and Joint Ventures
 6 Months Ended
Apr. 30, 2024
Investments in Associates and Joint Ventures [Abstract]  
Investment in Associates and Joint Ventures
NOTE 7: INVESTMENT IN ASSOCIATES AND JOINT VENTURES
INVESTMENT IN THE CHARLES SCHWAB CORPORATION
 
The Bank has significant influence over
 
The Charles Schwab Corporation (“Schwab”)
 
and the ability to participate in the financial
 
and operating policy-making
decisions of Schwab through a combination
 
of the Bank’s ownership, board representation
 
and the insured deposit account agreement
 
between the Bank and
Schwab. As such, the Bank accounts for its
 
investment in Schwab using the equity
 
method. The Bank’s share of Schwab’s earnings available
 
to common
shareholders is reported with a one-month
 
lag. The Bank takes into account changes
 
in the one-month lag period that would
 
significantly affect the results.
As at April 30, 2024, the Bank’s reported investment
 
in Schwab was approximately
12.3
% (October 31, 2023 –
12.4
%), consisting of
9.8
% of the outstanding
voting common shares and the remainder
 
in non-voting common shares of Schwab
 
with an aggregate fair value of $
23
 
billion (US$
17
 
billion) (October 31, 2023 –
$
16
 
billion (US$
12
 
billion)) based on the closing price of US$
73.95
 
(October 31, 2023 – US$
52.04
) on the New York Stock Exchange.
The Bank and Schwab are party to a stockholder
 
agreement (the “Stockholder Agreement”)
 
under which the Bank has the right
 
to designate two members of
Schwab’s Board of Directors and has representation
 
on two Board Committees, subject to
 
the Bank meeting certain conditions. The Bank’s designated
 
directors
currently are the Bank’s Group President and
 
Chief Executive Officer and the Bank’s former Chair
 
of the Board. Under the Stockholder Agreement,
 
the Bank is not
permitted to own more than
9.9
% voting common shares of Schwab,
 
and the Bank is subject to customary
 
standstill restrictions and subject to certain exceptions,
transfer restrictions.
 
The carrying value of the Bank’s investment in
 
Schwab of $
9.9
 
billion as at April 30, 2024 (October 31,
 
2023 – $
8.9
 
billion) represents the Bank’s share of
Schwab’s stockholders’ equity, adjusted for goodwill, other intangibles,
 
and cumulative translation adjustment.
 
The Bank’s share of net income from its investment
in Schwab of $
194
 
million and $
335
 
million during the three and six months ended
 
April 30, 2024, respectively (three and
 
six months ended April 30, 2023 –
$
241
 
million and $
526
 
million, respectively), reflects net income
 
after adjustments for amortization of
 
certain intangibles net of tax.
 
The following tables represent the gross
 
amount of Schwab’s total assets, liabilities,
 
net revenues, net income available to common
 
stockholders, other
comprehensive income (loss), and comprehensive
 
income (loss).
Summarized Financial Information
(millions of Canadian dollars)
As at
March 31
September 30
2024
2023
Total assets
$
634,593
$
644,139
Total liabilities
577,180
592,923
(millions of Canadian dollars)
For the three months ended
For the six months ended
March 31
March 31
March 31
March 31
2024
2023
2024
2023
Total net revenues
$
6,393
$
6,915
$
12,466
$
14,380
Total net income available to common stockholders
1,687
2,072
2,948
4,544
Total other comprehensive income (loss)
749
2,610
4,319
3,331
Total comprehensive income (loss)
 
2,436
 
4,682
 
7,267
 
7,875
Insured Deposit Account (“IDA”) Agreement
On November 25, 2019, the Bank and Schwab
 
signed an insured deposit account agreement
 
(the “2019 Schwab IDA Agreement”), with
 
an initial expiration date of
July 1, 2031. Under the 2019 Schwab IDA Agreement,
 
starting July 1, 2021, Schwab had the option
 
to reduce the deposits by up to US$
10
 
billion per year (subject
to certain limitations and adjustments),
 
with a floor of US$
50
 
billion. In addition, Schwab requested some
 
further operational flexibility to allow for
 
the sweep
deposit balances to fluctuate over time, under
 
certain conditions and subject to certain limitations.
On May 4, 2023, the Bank and Schwab entered
 
into an amended insured deposit account
 
agreement (the “2023 Schwab IDA Agreement”
 
or the “Schwab IDA
Agreement”), which replaced the 2019 Schwab
 
IDA Agreement. Pursuant to the 2023 Schwab
 
IDA Agreement, the Bank continues to make
 
sweep deposit
accounts available to clients of Schwab. Schwab
 
designates a portion of the deposits
 
with the Bank as fixed-rate obligation amounts
 
(FROA). Remaining deposits
over FROA are designated as floating-rate
 
obligations. In comparison to the 2019 Schwab
 
IDA Agreement, the 2023 Schwab IDA Agreement
 
extends the initial
expiration date by three years to July 1, 2034
 
and provides for lower deposit balances
 
in its first six years, followed by higher balances
 
in the later years.
Specifically, until September 2025, the aggregate FROA will serve
 
as the floor. Thereafter, the floor will be set at US$
60
 
billion. In addition, Schwab has the option
to buy down up to $
6.8
 
billion (US$
5
 
billion) of FROA by paying the Bank certain
 
fees in accordance with the 2023 Schwab IDA
 
Agreement, subject to certain
limits. Refer to Note 27 of the Bank’s 2023
 
Annual Consolidated Financial Statements
 
for further details on the Schwab IDA Agreement.
During the first quarter of 2024, Schwab exercised
 
its option to buy down the remaining $
0.7
 
billion (US$
0.5
 
billion) of the US$
5
 
billion FROA buydown
allowance and paid $
32
 
million (US$
23
 
million) in termination fees to the Bank in accordance
 
with the 2023 Schwab IDA Agreement. By the
 
end of the first quarter
of 2024, Schwab had completed its buy down
 
of the full US$
5
 
billion FROA buydown allowance and had paid
 
a total of $
337
 
million (US$
250
 
million) in termination
fees to the Bank. The fees were intended to
 
compensate the Bank for losses incurred
 
from discontinuing certain hedging relationships
 
and for lost revenues. The
net impact was recorded in net interest income.