NOTE 5: SECURITIES

Unrealized Securities Gains (Losses)

The following table summarizes the unrealized gains and losses as at January 31, 2020 and October 31, 2019.

Unrealized Gains (Losses) for Securities at Fair Value Through Other Comprehensive Income


(millions of Canadian dollars)														As at
					January 31, 2020									October 31, 2019
	Cost/ amortized cost¹		Gross unrealized gains		Gross unrealized (losses)			Fairvalue		Cost/ amortized cost¹		Gross unrealized gains		Gross unrealized (losses)			Fair value

Securities at Fair Value Through Other Comprehensive Income
Government and government-related securities
Canadian government debt
Federal	$	8,963	$	74	$	(1	)	$	9,036	$	9,603	$	62	$	(2	)	$	9,663
Provinces		13,325		91		(35	)		13,381		12,890		77		(40	)		12,927
U.S. federal, state, municipal governments, and agencies debt		40,232		115		(40	)		40,307		40,703		86		(52	)		40,737
Other OECD government guaranteed debt		12,412		26		(5	)		12,433		14,394		21		(8	)		14,407

Mortgage-backed securities		5,007		22		(1	)		5,028		5,407		31		(1	)		5,437

		79,939		328		(82	)		80,185		82,997		277		(103	)		83,171
Other debt securities
Asset-backed securities		14,232		35		(53	)		14,214		15,890		29		(31	)		15,888
Non-agency collateralized mortgage obligation portfolio		218		–		–			218		247		–		–			247

Corporate and other debt		8,227		33		(19	)		8,241		7,832		27		(25	)		7,834

		22,677		68		(72	)		22,673		23,969		56		(56	)		23,969

Total debt securities		102,616		396		(154	)		102,858		106,966		333		(159	)		107,140
Equity securities
Common shares		2,576		72		(34	)		2,614		1,594		31		(27	)		1,598

Preferred shares		302		4		(56	)		250		302		4		(64	)		242

		2,878		76		(90	)		2,864		1,896		35		(91	)		1,840
Total securities at fair value through other comprehensive income	$	105,494	$	472	$	(244	)	$	105,722	$	108,862	$	368	$	(250	)	$	108,980

¹	Includes the foreign exchange translation of amortized cost balances at the period-end spot rate.

Equity Securities Designated at Fair Value Through Other Comprehensive Income

The Bank designated certain equity securities shown in the following table as equity securities at FVOCI. The designation was made because the investments are held for purposes other than trading.

Equity Securities Designated at Fair Value Through Other Comprehensive Income


(millions of Canadian dollars)			As at		For the three months ended
	January 31, 2020		October 31, 2019		January 31, 2020		January 31, 2019
			Fair value		Dividend income recognized
Common shares	$	2,614	$	1,598	$	27	$	20
Preferred shares		250		242		3		4
Total	$	2,864	$	1,840	$	30	$	24

The Bank disposed of equity securities in line with the Bank's investment strategy with a fair value of $5 million during the three months ended January 31, 2020 (three months ended January 31, 2019 – $179 million). The Bank realized a cumulative gain (loss) of nil during the three months ended January 31, 2020 (three months ended January 31, 2019 – $24 million) on disposal of these equity securities and recognized dividend income of nil during the three months ended January 31, 2020 and January 31, 2019.

Securities Net Realized Gains (Losses)


(millions of Canadian dollars)	For the three months ended
	January 31 2020		January 31 2019
Debt securities at amortized cost	$	–	$	44
Debt securities at fair value through other comprehensive income		10		(55	)
Total	$	10	$	(11	)

Credit Quality of Debt Securities

The Bank evaluates non-retail credit risk on an individual borrower basis, using both a borrower risk rating and facility risk rating, as detailed in the shaded area of the "Managing Risk" section of the 2019 MD&A. This system is used to assess all non-retail exposures, including debt securities.

The following table provides the gross carrying amounts of debt securities measured at amortized cost and debt securities at FVOCI by internal risk ratings for credit risk management purposes, presenting separately those debt securities that are subject to Stage 1, Stage 2, and Stage 3 allowances.

Debt Securities by Risk Ratings

(millions of Canadian dollars)

As at

January 31, 2020

October 31, 2019

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Debt securities

Investment grade

235,661

–

n/a

235,661

235,475

–

n/a

235,475

Non-Investment grade

1,936

116

n/a

2,052

2,109

n/a

2,163

Watch and classified

n/a

–

n/a

–

n/a

–

n/a

–

Default

n/a

–

n/a

–

Total debt securities

237,597

116

–

237,713

237,584

–

237,638

Allowance for credit losses on debt securities at amortized cost

–

Debt securities, net of allowance

237,596

116

–

237,712

237,583

–

237,637

As at both January 31, 2020 and October 31, 2019, the allowance for credit losses on debt securities was $4 million, comprised of $1 million for debt securities at amortized cost (DSAC) and $3 million for debt securities at FVOCI. For the three months ended January 31, 2020 and January 31, 2019, the Bank reported a provision of credit losses of nil on DSAC and debt securities at FVOCI.