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Canadian banks The fourth quarter earnings season brought good tidings to certain banks, including TD and RBC who saw profits double.

BMO, on the other hand, missed analysts’ expectations for adjusted earnings.

Its problems were not unique, however, as many of the banks reported dwindling margins on loans in this perpetual low-rate environment.

Below are some tidbits from each of the banks’ fourth quarter earnings:

Royal Bank of Canada

Net income: $1.6 billion (+43% Y/Y)

Earnings per share: $1.07

  • Residential mortgage volume grew 7% Y/Y (Source)
  • Residential mortgages comprise two-thirds (65%) of RBC’s $253 million retail lending portfolio (Source)

Bank of Montreal 

Net income: $897 million (+21% Y/Y)

Earnings per share: $1.34 

  • Revenue increased a paltry 1.1%, helped by volume growth across most products but offset by lower deposit spreads in a low interest rate environment, competitive mortgage pricing and lower mortgage refinancing fees. (Source)
  • Total personal lending balances (including mortgages, Homeowner ReadiLine® and other consumer lending products) increased 5.3% year over year while lending market share decreased. (Source)
  • Net Interest Margin (NIM) decreased 4 bps Q/Q due to lower deposit spreads and mortgage refinancing fees (Source)
  • BMO’s residential mortgage portfolio stands at about $42 billion, representing about 7.5% of the Canadian residential mortgage market (about $563 billion). (Source)


Net income: $794 million (+59% Y/Y)

Earnings per share: $1.89 a share 

  • Residential mortgages increased by $6.0 billion, or 6%, and constitute 69% (2010: 67%) of the total consumer loan portfolio. (Source)
  • Growth was hurt by lower spreads in deposits and mortgages (Source)
  • Tom Woods, Sr. VP, Risk Management, CIBC, said: “We’ve insured 77% of our managed portfolio and 66% of our own portfolio with over 90% of the insurance being provided by CMHC. (Source)
  • The average loan-to-value of CIBC’s insured portfolio, based on August home price data, was 49%.(Source)
  • “For a good portion of the quarter, the prepayment fees collected from customers were actually lower than the actual breakage cost to the bank. This was largely due to the interest rate environment and should be a factor for the industry as a whole.” – David Williamson, Sr. VP, Retail and Business Banking (Source)
  • “On the asset pricing, there are competitive pressures, primarily, I’d say on our mortgage books and that’s having an impact…the spreads of the mortgages that are rolling off are more robust than the mortgages that we added onto the books currently.” – David Williamson, Sr. VP, Retail and Business Banking (Source)
  • Here’s a prior related story: CIBC Revises Mortgage Strategy

TD Bank 

Net income: $1.57 billion (+58% Y/Y)

Earnings per share: $1.69 

  • Its Canadian residential mortgage balance stood at $72.8 billion in Q4, up from $70.6 billion in Q3. (Source)
  • “From a margin point of view, we were down about 6 basis points quarter-on-quarter, which is more than we thought … I would say that we had about 2 points of decline from competitive pressure notably on the real estate secured lending products and that’s sort of inclusive of a mortgage breakage …” – Timothy D. Hockey,  TD Bank Group President and CEO (Source)
  • “…whenever we have a mortgage client, we have more than four other products with that client. When we don’t have a mortgage with the client then we have approximately two products with that client.” – Bharat B. Masrani – President and CEO, TD Bank (U.S.)

Scotia Bank 

Net income: $1.24 billion (+11% Y/Y)

Earnings per share: $1.07

  • Q4 residential mortgage volume: $142.2 billion, up 3% Q/Q and up 8.8% Y/Y from $133.4 billion (Source)
  • Market share in Q4 2011 was 20.3%, unchanged Q/Q, but down from 20.5% in Q4 2010. (Source)
  • “In the mortgage portfolio, the pressure has been downward, because as we got mortgages that have matured, they are maturing and renewing at smaller margins.” – Rick Waugh, President and CEO (Source)
  • “What we have seen in the last six to seven weeks, is that there is a little more normality coming back into the mortgage market, particularly on the two-year and five-year segment. So that’s I think one of the areas that we expect to stabilize and see stabilization in terms of income.” – Rick Waugh, President and CEO (Source)

National Bank of Canada

Net income: $294 million (+2% Y/Y)

Earnings per share: $1.74 a share

  • Monthly volume of residential mortgages: $28.4 million in Q4 2011 vs. $25.4 million in Q4 2010 (Source)
  • Residential mortgages were up by 12% Y/Y, totalling $28.4 billion as at October 31, 2011 (Source)

Steve Huebl, CMT