A balance sheet is a financial statement that provides a snapshot of what a company owns (assets) and owes (liabilities), as well as shareholders' investment in the company (shareholders' equity) at a specific point in time.
The fundamental accounting equation that a balance sheet follows is:
Assets = Liabilities + Shareholders' Equity
Key Components of Balance Sheet | ||
---|---|---|
Assets | Liabilities | Shareholders' Equity |
Current Assets (cash, inventory, accounts receivable) | Current Liabilities (short-term debt, accounts payable) | Share capital |
Non-current Assets (property, equipment, intangible assets) | Non-current Liabilities (long-term debt, bonds) | Retained earnings and other equity components |
The balance sheet helps stakeholders:
Bank balance sheets differ significantly from traditional corporate balance sheets in several key ways:
Bank | ... | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
RBC | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 874,468 | 875,109 | 969,599 | 972,472 | 981,415 |
TD | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 921,073 | 925,327 | 940,058 | 946,314 | 957,873 |
BMO | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 668,583 | 652,932 | 664,658 | 677,995 | 682,731 |
Scotiabank | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 757,283 | 750,220 | 760,033 | 765,793 | 767,365 |
National Bank | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 226,067 | 230,872 | 235,518 | 240,418 | 243,982 |
CIBC | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 540,153 | 539,295 | 543,897 | 550,149 | 558,292 |
Source: WOWA Data Labs
Bank | ... | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
RBC | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 3,061,402 | 3,035,165 | 3,083,371 | 1,361,265 | 1,409,531 |
TD | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1,198,190 | 1,181,254 | 1,203,771 | 1,220,550 | 1,268,680 |
BMO | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 910,879 | 914,138 | 937,572 | 965,239 | 982,440 |
Scotiabank | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 952,333 | 939,773 | 942,028 | 949,201 | 943,849 |
National Bank | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 288,173 | 300,097 | 306,881 | 320,587 | 333,545 |
CIBC | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 723,376 | 724,545 | 731,952 | 743,446 | 764,857 |
Source: WOWA Data Labs
Following is the balance sheet of the Royal Bank of Canada, the largest Canadian bank.
BALANCE SHEETS | Q4/24 | |||
---|---|---|---|---|
(Millions of Canadian dollars) | ||||
Period-end balances | ||||
ASSETS | ||||
Cash and due from banks | 56,723 | |||
Interest-bearing deposits with banks | 66,020 | |||
Securities | ||||
Trading | 183,300 | |||
Investment, net of applicable allowance | 256,618 | |||
439,918 | ||||
Assets purchased under reverse repurchase agreements and securities borrowed | 350,803 | |||
Loans | ||||
Retail | 626,978 | |||
Wholesale | 360,439 | |||
987,417 | ||||
Allowance for loan losses | (6,037) | |||
981,380 | ||||
Other | ||||
Customers' liability under acceptances | 35 | |||
Derivatives | 150,612 | |||
Premises and equipment | 6,852 | |||
Goodwill | 19,286 | |||
Other intangibles | 7,798 | |||
Other assets | 92,155 | |||
Total Assets | 2,171,582 | |||
LIABILITIES AND EQUITY | ||||
Deposits | ||||
Personal | 522,139 | |||
Business and government | 839,670 | |||
Bank | 47,722 | |||
1,409,531 | ||||
Other | ||||
Acceptances | 35 | |||
Obligations related to securities sold short | 35,286 | |||
Obligations related to assets sold under repurchase agreements and securities loaned | 305,321 | |||
Derivatives | 163,763 | |||
Insurance contract liabilities | 22,231 | |||
Other liabilities | 94,677 | |||
Subordinated debentures | 13,546 | |||
2,044,390 | ||||
Equity attributable to shareholders | ||||
Preferred shares and other equity instruments | 9,031 | |||
Common shares | 20,952 | |||
Retained earnings | 88,608 | |||
Other components of equity | 8,498 | |||
127,089 | ||||
Non-controlling interests (NCI) | 103 | |||
127,192 | ||||
Total Liabilities and Equity | 2,171,582 |
One should note that an indentation means a subcategory when reading a balance sheet. In the example above, we have “ASSETS” and “LIABILITIES AND EQUITY” at the leftmost position, meaning that they are the most general categories.
Bank | ... | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
RBC | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 2,006,531 | 1,974,405 | 2,031,050 | 2,076,107 | 2,171,582 |
TD | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1,955 | 1,911 | 1,967 | 1,967 | 2,062 |
BMO | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1,347,006 | 1,324,762 | 1,374,053 | 1,400,470 | 1,409,647 |
Scotiabank | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1,411 | 1,393 | 1,399 | 1,402 | 1,412 |
National Bank | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 423,477 | 433,927 | 441,690 | 453,933 | 462,226 |
CIBC | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 1.11 | 975,690 | 971,667 | 1,001,758 | 1,021,407 | 1,041,985 |
Beneath “Assets” and shifted to the right, we see various types of assets. These include Cash and due from banks, Interest-bearing deposits with banks, Securities, Assets purchased under reverse repurchase agreements, Loans, and Others.
"Cash and due from banks" primarily includes physical cash holdings (notes and coins), in-transit/clearing items, and nostro accounts for payment and settlement purposes. A nostro account is a bank account that a bank holds with another bank in a foreign country and in that foreign country's currency. Due from banks represents funds the bank has at other banks for operational purposes like payments clearing and settlements.
"Interest-bearing deposits with banks" represents funds placed with other financial institutions (including central banks) that earn interest. These are part of a bank's liquid asset management and include term deposits, money market deposits, and settlement balances with central banks that earn interest at the policy rate. While they earn interest, these deposits remain highly liquid and can be used for the bank's funding and liquidity management needs.
Beneath “securities”, there is an indentation, which means that we see the subcategories of this line beneath it. These subcategories are “trading” and “Investment, net of applicable allowance.” Securities on a bank's balance sheet represent financial instruments like government bonds, corporate bonds, equities, and other marketable securities.
Classification of Securities | |
---|---|
Trading Securities | Investment Securities |
Held primarily to profit from short-term price movements | Held for longer-term investment purposes |
Marked-to-market (fair value) with changes going through profit and loss | Can include securities held to maturity or available for sale |
More actively bought and sold | Used for asset-liability management |
Used for market-making and client facilitation | Source of stable interest income |
Part of banks' trading/market risk activities | May include less liquid securities |
More liquid securities typically | Subject to credit loss allowances for debt securities |
Changes in fair value may go through other comprehensive income rather than profit and loss (depending on classification) |
The next line in RBC's balance sheet is “Assets purchased under reverse repurchase agreements”. These and securities borrowed are both forms of secured lending where the bank receives securities as collateral.
Loans are the largest category of assets for banks. They include retail and wholesale loans.
The bottom half of the balance sheet lists amounts of Liabilities and Equities. A bank's most important and largest category of liabilities is its deposits. In the example above, RBC’s balance sheet classifies deposits based on the depositor. Personal deposits, Business and government deposits, and bank deposits are all reported. Other important liabilities of the bank include repurchase agreements and securities loaned and also derivative liabilities.
Disclaimer: