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Bank Q1 Earnings

CanadianBanks Canada’s Big Six banks earned a collective $6.5 billion in the first quarter of 2011. Not a bad way to start off the year.

Here’s a look at some of the notable mortgage-related items from their financial reports.

Royal Bank

Q1 profit: $1,839 million (C$1.24 per share)

Increase from Q1 2010: 23%

  • CEO, Gord Nixon: "I find the environment to be very competitive right now, probably as competitive as we've seen it in a number of years. Not only on the deposit side but I'd say more so on the mortgage and consumer lending side with some very difficult pricing environments as we head into the spring mortgage season." (Source: RBC conference call)
  • Residential mortgages in Q1 totalled $156.3 billion, up from $154.2 B in Q4 2010 and up 5% Y/Y. (Source)
  • Retail loan assets totalled $241 billion in Q1 2011, 65% of which consisted of residential mortgages. (Source)
  • Referring to mortgage regulatory changes to come into effect this month, the RBC report noted, “We do not expect these rules will have a material impact on our Canadian Banking operations or results.” (Source)
  • Royal Bank, Canada’s largest lender, said last week its net interest margin narrowed to 1.51 percent from 1.65 percent, a year ago." (Source)
  • Insured mortgages account for 21% of RBC’s residential mortgage portfolio. (Source)
  • GIL (Gross Impaired Loans) in Canadian Banking increased $171 million, or 14%, mainly due to higher impaired loans in RBC’s residential mortgage and business lending portfolios. (Source)


TD Bank

Q1 profit: C$1,590 million (C$1.74 per share)

Increase from Q1 2010: 18%

  • The balance of residential mortgages rose to 5.9% to $64.2 billion in the first quarter, up from $60.6 billion in Q4. (Source)
  • Home Equity Lines of Credit fell in Q1 to $58.8 billion from $59 billion in Q4. (Source)
  • “Credit conditions are developing as anticipated, with our loan quality gradually improving. Our mortgage securities portfolio is showing modest signs of strain, but we’re very well provisioned,” said President and CEO Ed Clark in comments to shareholders. (Source)
  • Average Loan to Value (LTV) of on-balance sheet assets (both insured and uninsured) < 52%. (Source)
  • 75% of HELOCs are in first lien position; a further 20% are in second to TD first (Source)
  • "…We are trying to hold the margins on (HELOCs) when some of our competitors have been very, very aggressive on pricing." (Source: TD conference call)


Scotia Bank

Q1 profit: $1,174 million (C$1.07 per share)

Increase from Q1 2010: 19%

  • Scotia’s residential mortgage market share rose marginally to 20.54% from 20.53% in last quarter. In the Q1 2010, market share was 20.23%. (Source)
  • Residential mortgages rose to $135.7 billion in the first quarter, up from $133.4 billion in Q4 2010 and up from $124.4 billion a year ago. (Source)
  • "…we're seeing that the amount of demand for mortgages has slowed down…We're also seeing some migration of customers who have lines of credit, moving over into the mortgage product, either with variable rates or fixed rates…The margins on mortgages is getting tighter and we're seeing that in the marketplace."  (Source: Scotiabank conference call)



Q1 Profit: $799 million (C$1.92 per share)

Increase from Q1 2010: 23%

  • Mortgage balances stood at $ 138.5 billion in the first quarter, giving CIBC a 13.7% market share (#2-ranked bank) (Source)
  • “CIBC Retail Markets is expected to face slower growth in demand for mortgages and household credit, and modest improvements in demand for business credit. The lagged impacts of the earlier recession on credit quality will continue to fade, allowing for an improvement in delinquencies and a reduction in personal bankruptcies.” (Source)
  • "The impact (of the new mortgage rules) on us will be modest…the industry in general has seen a modest uptick in advance of those rules coming into play, but even that I would say hasn't been substantive." (Source: CIBC conference call)



Q1 Profit: $776 million (C$1.32 per share)

Increase from Q1 2010: 18%

  • Residential mortgages totalled $65.3B in Q1 2011, up from $64.9B in Q4 and $63.9B in Q1 2010. (Source)
  • “Total personal lending balances increased y/y and q/q, driven by growth in branch-originated mortgages and Homeowner ReadiLine products.” (Source)
  • In its economic outlook, the BMO report noted that, “Higher interest rates and stricter mortgage rules are expected to moderate consumer spending and housing activity, slowing growth in personal credit and residential mortgages.” (Source)
  • Total personal lending balances (including mortgages, Homeowner ReadiLine and other consumer lending products) increased 6.5% year over year. (Source)
  • Total personal lending market share increased year over year as personal lending increased, led by Homeowner ReadiLine. (Source)
  • …mortgage market share decreased. (Again.)
  • “Our goal is to grow market share and we continue to focus on improving the total personal lending business through investment in the sales force and achieving productivity gains while remaining attentive to the credit quality of the portfolio.” (Source)


National Bank

Q1 profit: $312 million (C$1.80 per share)

Increase from Q1 2010: 45%

  • Traditional residential mortgage loans continued to grow, reaching $25.9 billion as at January 31, 2011. That’s up from $25.4 as at October 2010 and up from $23.6 billion as of January 2010. (Source)
  • Year-over-year mortgage growth was 9.8% (Source)
  • "The 10% year-over-year increase in personal loans is mainly attributable to volume growth in the All-in-One secured credit line, as well as mortgages." (Source: NBC conference call)

Steve Huebl, CMT