Mortgage Tidbits from Banks’ Q2 Reports

Canadian banks Canada’s Big Six banks earned a little over $6 billion in the second quarter, but competitive pressures and narrowing mortgage margins were a common theme.

Here’s a look at some of the more interesting mortgage-related items in their Q2 financials.

Royal Bank of Canada

Q2 net income: $1,506 million (C$1.00 per share)
13% increase from Q2 2010

  • Insured mortgages accounted for 24% of RBC’s residential mortgage portfolio (Source)
  • Residential mortgage loans value rose 6% year-over-year (Source)
  • According to David McKay, head of Canadian Banking at RBC:  There have been some “very aggressive” pricing strategies in the marketplace around mortgages, “not just HELOCs in the marketplace, but in mortgages in general, as we go through what is traditionally a very competitive spring mortgage season.” (Source)
  • CEO Gordon Nixon said RBC is seeing some “pretty unusual activity” in terms of aggressive pricing in the mortgage market, which “is probably having the biggest pressure on margins.” He says:  “…our people are going to back away from cutting profitability…because some of the activity we’ve seen in the mortgage market…imply very low margins to say the least.” (Source)
  • “I think our mortgage specialist sales force allows us to originate very, very strong volumes in a cost effective manner,” said David McKay. “There is no doubt we feel that is a competitive advantage along with solid volumes through our traditional branch channels…(Source)

TD Bank

Q2 net income: C$1,332 million (C$1.46 per share)
13% increase from Q2 2010

  • TD marked their second-best quarter on record
  • “Loan growth was within expectations for the quarter and strong volume growth is expected to continue through fiscal 2011 driven by residential mortgages and commercial lending.” (Source)
  • Excluding acquisitions and segment transfers, average loan volumes were up 12% year-over-year, primarily in residential mortgages and commercial loans. (Source)
  • “So far year-over-year we continue to be the largest grower in market share in…both HELOC and real estate secured lending,” said Tim Hockey, head of TD’s Canadian Banking operations. “We have a very attractive mortgage product right now which is growing very, very fast.”
  • “…we think within days we will kick over C$200 billion in total real estate secured lending and that makes us the number one player in Canada.” (Source)

Scotia Bank

Q2 net income: $1,540 million (C$1.36 per share)
38% increase from Q2 2010 (1.12 in 2010)

  • “Scotiabank experienced market share gains in residential mortgages…” said Rick Waugh, Scotiabank President and CEO (Source)
  • Residential mortgage volume stood at $136.7 billion in Q2, a 10.7% increase year-over-year (Source)
  • Residential mortgage market share grew to 20.47% in Q2, up from 20.28% in the second quarter of 2010 (Source)
  • Anatol von Hahn, head of the Canadian Banking operations, said:  “In short, what we’re seeing is…our existing customers as their mortgages come due are opting to go in large part into variable rate mortgages…they have got a much lower interest rate or yield…new customers are opting into the same product—the variable rate product.”
  • What we expect is, and what we see our customers doing is…looking and waiting until interest rates go up before they’ll lock-in for the five-year fixed.” (Source)


Q2 net income: $678 million (C$1.60 per share)
2.7% increase from Q2 2010

  • CIBC Retail Markets is expected to face slower growth in demand for mortgages and household credit. (Source)
  • “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)
  • Personal Banking was helped by higher volumes in cards, mortgages and deposits, but partially offset by lower spreads (Source)
  • CIBC’s mortgage balance sat at $140.9 billion (Source)
  • Mortgage market share held steady at 13.7% for a 2nd place ranking (Source)
  • “The competitive force right now in lending broadly and in mortgages is fairly strong,” said President and CEO Gerald McCaughey. “So, looking forward, our plan is for net interest margins to stabilize and be relatively flat, but it’s going to be somewhat dependent on the degree of…competitive pressure in the marketplace.” (Source)


Q2 net income: $800 million (C$1.34 per share)
7% increase from Q2 2010

  • In its economic outlook, the bank said higher interest rates and stricter mortgage qualifying rules “will likely temper activity in the housing market, slowing growth in residential mortgages.” (Source)
  • The bank’s residential mortgage balance (owned and managed) stood at $65.6 billion in Q2, up from 63.6 billion in Q2 2010 (Source)
  • Net interest margin decreased seven basis points due to continued low interest rates in a competitive environment resulting in lower mortgage…spreads. (Source)
  • “…I think we would have all anticipated a bit of relief from a rate increase perspective,” said Frank Techar, President and CEO of Personal and Commercial Banking. “Because interest rates have remained very low, we’re still seeing customer preferences focused on lower spread variable rate mortgages, when we would have anticipated this perhaps would have changed by this point in the year.” (source)
  • Techar said BMO has added more than 1,000 employees, many of them mortgage specialists. (Source)

National Bank

Q1 net income: $295 million (C$1.48 per share)
13% increase from Q2 2010

  • National’s Personal Banking revenues rose $13 million, “mainly due to higher loan volumes, especially consumer and mortgage loans” (Source)
  • Mortgage volume increased to $26.5 billion as of April 2011, up from $24 billion a year earlier (Source)
  • The 10% year-over-year increase in personal loans is mainly attributable to volume growth in mortgages. (Source)
  • “We believe that there will probably still (be) high single-digit growth in mortgages going forward, but they are definitely going down,” said Rejean Levesque, executive vice-president of Personal and Commercial Banking. (Source)

Steve Huebl, CMT

  1. Great Q2 Bank summary report, Rob. Its interesting that the Royal Bank who lately are the most aggressive of the big 5 banks in terms of growing their mortgage and HELOC business by being the first to drop rates seem to be, if you look solely at the net income per share, growing business at the expense of their profit margins. Meanwhile the TD who has taken a lot of heat in the media and this site over their self-serving switch to collateral-charge mortgages late last year is still aggressively growing their business. Regrettably, that is quite an accomplishment!
    I wonder how many joe public mortgage shoppers are actually aware that some FI’s offer collateral charge mortgages while others offer traditional, conventional mortgages and the stark differences?
    Personally, I think it’s a dis-service to the public to still call collateral charge mortgages, Mortgages!

  2. Thanks Banker. Steve Huebl gets all the credit on this one…
    Further to your point, TD has been growing share with a big push from its retail sales force and very competitive pricing. As a result, they’ve picked up share but potentially at the expense of further pressure on mortgage margins.
    You’re absolutely right that most customers are still blind to the negative implications of collateral charges. It will take a lot more time to educate the masses…

  3. What is TD’s attractive mortgage product that is growing ‘very, very fast’? Also, CIBC is the 2nd largest mortgage lender in terms of market share following Scotiabank? That’s surprising.

  4. TD has competitive pricing?
    When there are better discounted market rates, especially from the BC Credit Unions, better HELOC rates at RBC or ATB, TD significantly increasing their account service charges later next month, them having “competitive pricing” isn’t the first thing that comes to my mind!

  5. Like all the Big 6 banks (BMO’s low-rate mortgage being the exception), TD doesn’t show its hand up front. Nonetheless, from the clients and TD mobile mortgage specialists I’ve talked with lately, TD has been giving out good rates (like prime – 0.85%) like candy. Some of their top-tier brokers are getting pretty good pricing as well…

  6. whats the difference between collateral charge mortgage and conventional. Is it only TD that binds clients with collateral charge?not others?
    how does it matter for average joe at end of term if his/hers was conventional or collateral..any explanation with numbers?

  7. Hi Rob is it possible to get this kind of analysis on non banker lenders, it is pretty interesting

  8. Hi Renu, Yes indeed, at least for public non-bank lenders anyhow. You can find management commentary online in earnings reports, annual reports and conference call transcripts (among other places). Cheers…

  9. I just got my mortgage with TD at p-.86 as I’ve been a repeat mortgage client for years. I doubt many people can beat that!!! thats money in my pocket!!!! The best part is that they service all of my needs as I am a business person also

  10. Happy client, the rate you shopped from TD is good but also common to many FI’s well qualified clients.
    Did the TD bank disclose to you that they only issue collateral mortgages while others issue conventional mortgages and fully explain the differences? that TD’s HELOC rates are lower at other FI’s? That some FI’s might charge a higher variable rate but also include other favourable features like CU profit sharing or no penalty clause after 3 years, accelerated payments ….etc? of course not!
    Always shop around because Bank’s offer one option and a Bank’s Senior Management answers to the following hierarchy:
    1. Board of directors
    2. Regulators/Government
    3. Shareholders
    4. New, well financed, potential clients
    5. Current long-time clients
    6. Rate trolls and bad credit
    Where do you rate on the hierarchy, 5 or 6? Sorry, your times up and I have a Board meeting to prepare for.

  11. I personally dont care about line of credit rates because I dont need one and my relationship with my mortgage specialist is more valuable along with what td can provide me banking-wise. Yes. I know about there collateral charge but so does rbc, bmo and a bunch of other banks have I dont see the big deal. btw my broker could only get my p-.80. Thank you TD bank. and dont tell me about getting me a good rate at some 3rd party lender that ive never heard of…wont happen.

  12. You are using the wrong broker if all he can get you was P-.80. Our broker got us P-.90 at a bank.
    Unlike TD, most banks don’t use collateral charges for regular mortgages. I bank at TD and would never use TD for a regular mortgage. There is no point because I won’t need to refinance and it will cost me more to switch lenders at renewal. There is nothing extra TD can provide me “banking-wise” if I keep my mortgage with them.

  13. Its great that your happy with TD. because, like it or not, your going to be dealing with them for years to come.
    Building mousetraps to trap clients is what we Banks do best and TD is seemingly getting really good at it. How many times do you hear people say “screw you (insert bank here), I am taking my business elsewhere”?
    1,2,3 years on, guess what?, they are still with the same bank. Why? Iron clad Mousetrap!

  14. hey john where and which bank is providing a rate of p-.90%????????
    wrong broker??? why would you say that… he GUARANTEED the lowest rate and was unable to deliver….
    why would it cost me more to switch lenders? I will go for the lowest rate and expect costs to be paid/see a true benefit in moving over. TD gives me what I want.
    Plus if I need more money in the future TD will do an increase for me without extra cost. I checked and scotia, RBC, bmo and credit unions all use collateral charges…Thanks.

  15. Why does Scotia claim a ’20+%’ share in the description above?
    Also, does anyone know the popular TD product that is growing fast?

  16. Happyclient you are wrong. Regular mortgages from Scotia, CIBC, RBC, and BMO can be switched. Other lenders will pick up the legal and appraisal cost.
    Not so for TD collateral charges.
    Why would you pay up front for the possibility that you might need more money? Why not give yourself the flexibility of a non-collateral mortgage and then just pay the refinance cost IF you need to?

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