Bank Mortgage Revenues Climb

ProfitMortgages are profit machines for Canada’s banks, most of which posted healthy loan growth in 2010.

Below we look at the mortgage performance of the top seven banks. Before we do that, however, there were some key bank trends to note in 2010:

  • Banks significantly padded their ranks of mortgage specialists. (Which partly explains broker market share losses this year.)
  • Rate competition intensified from branches and mobile sales forces.
  • With credit markets stabilizing, many banks cut back on their mortgage securitization compared to 2009.

Here are summaries of each bank’s mortgage performance based on their latest earnings reports. (Our comments in italics.)

BMOBMO

  • BMO’s residential mortgages on the balance sheet grew 7.0% ($3.2 billion) in 2010. (Source)
  • “We are successfully replacing the runoff of our broker channel loans with our branch-originated balances.”
  • BMO’s mortgage market share fell to 9.2%. (Source) [BMO’s mortgage share has dropped almost continuously since they exited the broker channel in 2007.]
  • “While mortgage market share decreased, Homeowners ReadiLine growth drove personal load growth of 16% and an increase in market share from a year ago.” (Source)
  • BMO increased its number of mortgage specialists 31% in 2010. (Source) [BMO is under intense pressure to curb its market-share losses. Adding more troops is a core part of its strategy. Unfortunately, it’s the same strategy most of the other banks are following.]

CIBCCIBC

  • Residential mortgages increased by 9% ($7.4 billion) in 2010, to $91.3 billion. (Source)
  • Residential mortgages constitute 67% of CIBC’s total consumer loan portfolio. (Source)
  • CIBC expects slower demand growth for mortgages in 2011. (Source)

Laurentian-Bank-MortgageLaurentian Bank

  • Since the beginning of the year, residential mortgage loans increased by 13.9% or $1.4 billion. (Source)  [Laurentian continues to make excellent progress in the broker channel.]
  • Laurentian attributed its success to “the Bank’s ability to meet customer’s needs, combined with the low interest rate environment, better economic conditions and overall favourable housing markets in Canada.” (Source)

National-Bank-Mortgages2National Bank of Canada

  • Residential mortgages were up 9% y/y, totalling $25.4 billion as of Oct. 31 2010. (Source) [NBC put up major growth numbers in the broker channel last year. We hear it has increased its targets significantly for 2011. Given this, we expect NBC to be quite competitive throughout next year.]

RBCRBC

  • RBC posted residential mortgage growth of 6.5% y/y. (Source)
  • RBC expects continued economic improvement to drive strength in home equity products (like its Homeline HELOC) and improvements in credit quality.
  • It expects mortgage volumes to moderate in 2011 due to a slowing housing market. (Source)
  • Insured mortgages accounted for 20% of RBC’s residential mortgage portfolio in 2010 vs. 24% in 2009. (Source)

ScotiabankScotiabank

  • Scotia’s residential mortgages grew 9% ($11 billion) last quarter y/y largely “as a result of low interest rates.” (Source)
  • Scotia’s mortgage market share is up 39 bps YTD versus other banks. (Source) [It was the top lender by volume in the broker channel last quarter.]
  • Scotia sees opportunities to sell more creditor life insurance to mortgage customers. (Source)

 

TD-BankTD Bank

  • TD saw residential mortgage growth of 2.8% in 2010 ($63.1 billion in 2010 vs. $61.4 billion in 2009). (Source) [Much of the industry is waiting to see if TD’s collateral charge policy negatively impacts its volumes going forward.]
  • TD added 20% more mobile mortgage specialists this year. (Source)

Steve Huebl & Rob McLister, CMT

  1. We have to watch closely to what are they doing,adopt and DON’T FEED THE BEAST (like Scotia & TD)!
    Our support to non-bank lenders = more competition = greater choice for consumers!

  2. Banks are hiring people off the street to become mortgage specialists. Most of these people have other side businesses or jobs. The banks’ strategy is to bleed the broker market, and hence the wholesale lenders. Even if these amateur mortgage specialists do one or two deals a year, that’s one or two deals the professional brokers do not get. That’s where the mortgage brokerage business is going, if the banks cannot be stopped. How to stop them? Force their mortgage specialists to be licensed.

  3. Agreed, all mortgage specialists (broker or bank) should be licensed, I find it odd that somehow bank specialists don’t have to be licensed to perform the same activities brokers do.

  4. Australia is a great example of what happened when several non bank lenders could not compete and brokers were left with only big banks to do business with.-less choice for the consumer with industry consolidation is not good for brokers or consumers. Also it should be notes that bank commissioned mortgage specialist are technically bank employees and are exempt from provincial licensing as they come under federal bank act for regulation

  5. In recent years the major banks have embarked on a clever retention strategy: have independent brokers deliver them clients and then they’ll take over the client from there. In their view the independent broker is a necessary evil.

  6. As a bank mortgage specialist I will let you in on a few facts:
    1. We do not hire off the street. Our applicants must have at least 3 years experience. And after hiring comes the training.
    2. We must be full time. We are not allowed to have other employment.
    3. So, we would not survive on 2 deals a month, let alone 2 a year. (And why would a bank supply equipment, support, training, benefits, etc to someone who skims a couple of broker deals annually?)
    4. FYI, in case you were wondering, we do not get our customers from the branches. That is strictly forbidden, we have to find our own customers, usually through referral.
    5. @Ericp is correct. We are federally regulated as bank employees. Very regulated. I might even say, over-regulated, monitored and more highly scrutinized than ever. Asking that a federally regulated bank employee to be licensed provincially makes no sense.
    Just a little bit of correct information.

  7. Thanks Mike for those corrections. I am a mobile mortgage specialist with a Credit Union, and I definitely was not hired just off the street.
    I feel some brokers are quite naive or ignorant in their thoughts about mortgage specialists. I think they should study some actual criteria before making some generalized statements about something they know nothing or very little about.

  8. Hi Mat,
    There’s definitely no shortage of misinformation, by bank reps and brokers alike. That’s why we appreciate peoples’ comments and clarifications in forums like this. The similarities and differences of banks specialists and mortgage planners is certainly a topic that deserves more attention. We’ll try to do a piece on it soon.
    Cheers,
    Rob

  9. As a former bank mortgage specialist, I can say for a fact what banks do hire are branch people whose experience is filling out the applications, pressing send and hoping the deals are approved. They may have years of experience filling out an application but no real experience in helping consumers.

  10. As a mortgage specialist that came from the branch, how can you say that branch employees have no real experience in helping consumers when they spend 8 hours a day and 5 days a week seeing customers on a daily basis, helping them with all their banking needs including day to day banking, investments, and credit needs. ?? You obviously didnt come from a branch.

  11. Mike s
    My sister is a bank broker hired with zero experience. Given three months paid training. She is fed deals from the branches as well as getting her own. Oh and she is paid half the amount the same bank pays independents.
    Consumers will go where there is good advice and real solutions, whether at the bank or brokers office the cream always rises to the top. Let us see where the industry is in two years.

  12. Mike,
    It is misleading for you to say “We are federally regulated as bank employees. Asking that a federally regulated bank employee to be licensed provincially makes no sense.”
    Federal regulations barely speak to ensuring bank employees give proper mortgage advice. There is also nothing to require a minimum level of mortgage education before making reocmmendations to people. That is the difference between federal and provincial regulations.
    Either bank specialists should be provincially regulated or OSFI should enforce the same kind of consumer protections on bank mortgage specialists as do provincial regulators on brokers.

  13. Getting back to the point of the headline – increase in revenues doesn’t necessarily translate into the same increase in profits. With everyone cutting each other’s throats on pricing, the only ones “making money” are the brokers.

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