Some of the Big 6 Banks posted surprising mortgage growth in the third quarter (Q3). That contributed to record profits in the cases of Royal Bank, Scotiabank and TD.

It also helped the five biggest banks boost shareholder dividends.

But with a laundry list of new mortgage restrictions kicking in, many question whether coming quarters will be as prosperous. For insights along these lines, we turned straight to the horses’ mouths (i.e., we poured through their Q3 bank reports and conference calls).

We compiled all the findings into the below summary of notable mortgage tidbits. If you’re really time-pressed, the focal points are highlighted.

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Bank of Montreal

Net income: $970 million (+37% Y/Y)

Earnings per share:$1.42

• BMO’s total Canadian residential mortgage
  portfolio stood at $73.9 billion in Q3, up 4.8% from $70.5 billion in Q2. (Source)
• Mortgage balances are up 6.1% Y/Y (Source)
• Of BMO’s total mortgage
  portfolio, 65% is insured, down from 70% in Q2. (Source)
• BMO’s Canadian residential
  mortgage portfolio represents 6.5% of the total Canadian residential mortgage
  market of $1.142 trillion (Source)
• The average LTV of its residential
  mortgage portfolio stands at 61%, down slightly from 62% in Q2. (Source)
• “We are attracting new
  customers and steadily increasing the amount of business existing customers are
  choosing to entrust to us,” said Bill Downe, President and Chief Executive
  Officer, BMO Financial Group. “The recent changes to Canada’s mortgage market
  announced by the Minister of Finance were prudent, responsible and timely; they
  align with BMO’s risk practices and ongoing efforts to encourage Canadians to
  borrow smartly.” (Source)
• “There was good volume growth
  across most product lines, including residential mortgages,” Downe added. “With
  the (Low-Rate Mortgage) promotion which began about two years ago…we’ve been at the forefront of a significant change in the
  structure of the Canadian residential mortgage market. We introduced the
  product because we saw it as a substantial benefit to customers, providing them
  with a faster path to increased home equity and certainty of monthly payments.
  With the success of this mortgage we have seen above average credit quality and
  importantly, the proportion of mortgages approved that are ultimately closed
  have also risen. We’ve attracted new customers and established a foundation for
  productive long-term relationships.” (Source)
• Frank Techar, President and CEO,
  Personal and Commercial Banking Canada, BMO: “… We saw some growth in Q2 and the way the market
  typically works is, Q3 is the strongest quarter overall…We did really well
  on the back of our 5 year fixed rate, 25 year amortization product promotion…Our objective was to promote a product that was in our
  customers best interest, pay less interest, payout the mortgage faster. We
  benefited because we now have customers who are going to be with us for a while
  and we saw a significant increase in new customers coming to BMO through the
  campaign as well. So, putting a fine point on it, our market share went up 21
  basis points in Q3, so we did more business than some of our competitors. It’s
  obviously an important product to us, as it is to others and we just think we
  had a really strong quarter. Our expectation is, we’ll see a little softening
  in Q4. Q4 is not typically a strong mortgage quarter, but we’re going to
  compete really strongly going forward.” (Source)

CIBC

Net income: $841 million (+42% Y/Y) 

Earnings per share:$2.00

• CIBC’s total Canadian residential mortgage
  portfolio stood at $145 billion in Q3, up slightly from $144 a year ago, with
  an LTV of 49%.  (Source)
• Of CIBC’s residential mortgage portfolio,
  77% is insured and 23% is uninsured. (Source)
• CIBC noted it has rolled out its Home Power Plan in Alberta and
  British Columbia. “The new offer combines the benefits of a traditional
  mortgage and a line of credit to give clients a long-term borrowing solution
  resulting in a deeper, longer term relationship with CIBC.” (Source)
• In its report to shareholders, CIBC
  referred to its sale of FirstLine and resulting departure from the broker
  mortgage channel by saying, “This strategic direction is consistent with Retail and
  Business Banking’s client-centric strategy, which has now put a greater
  emphasis on branch mortgage originations.” (Source)
• Residential mortgages were up $636 million due to
  mortgage originations, partially offset by principal repayments and
  liquidations. (Source)
• CIBC’s
  Canadian condominium mortgages totalled $17.1 billion in Q3, identical to the
  same period a year ago, of which 77% is insured. (Source)
• Condos account for
  approximately 12% of CIBC’s total mortgage portfolio, with about 70% in Ontario
  and B.C. (Source)
• CIBC mortgage portfolio gained
  market share with 9% year-over-year growth. (Source)
  Renewals from FirstLine account for approximately 0.5% of this growth. (Source)
• “Since, we introduced our
  capability for FirstLine customers to renew into CIBC brand on mortgages back
  in April, we’ve been meeting our migration targets that we originally outlined
  [of 50% client retention],” said David Williamson, SEVP, CIBC, and Group Head, Retail and Business Banking.
  “A second point I’d make is that the spreads that we’re
  achieving on the converted mortgages are also hitting our targets. I won’t for
  competitive reasons outline what those NIM targets are, but they are
  substantively higher than what we were achieving in 2011.” (Source)
• CIBC has been “welcoming” FirstLine mortgage customers to the CIBC brand with a promotion on banking fees.
• Williamson added: “…Our NIMs are expanding so we are certainly not trying to reach for…growth by taking lower prices.” (Source)
• Asked about the fact that CIBC is growing its mortgage
  book faster than its peers, in the context of a tempered outlook for real
  estate, David Williamson – SEVP, CIBC, and Group Head, Retail and Business
  Banking,
  said this: “…We will be the only
  bank that’s actually reducing our mortgage banking balances over the next few
  years, so we’ve got FirstLine which is near enough to $50 billion that’s
  burning off, so although our own brand which has better margins allows for
  deeper relationships and cross-sell, that will be growing, but the $50
  billionish is going to be burning off… We are pulling back on overall
  mortgage exposure if you will and we are trying to get the right kind of
  balances with our clients, bring out deeper relationships and wider NIMs
  and exiting the business that doesn’t have those attributes.” (Source)

National Bank of Canada

Net income: $379 million (+13% Y/Y)

Earnings per share:$2.14

• “National Bank continues to pose strong volume growth in its lending activities. Mortgages and personal loans volume were up 13%…” (Source)
• In National Bank’s retail portfolio, “insured mortgages remain the largest asset in the book accounting for 38% of the portfolio. HELOCs and uninsured mortgages represents 24% and 17% respectively.” (Source)
• “The average loan-to-value on the HELOC and uninsured mortgage portfolio was approximately 54%.”
• As at July 31, 2012, the volume of
  residential mortgages totalled $31.5 billion, up from $27.6 billion a year
  earlier. (Source)
• When asked about mortgage broker business, Diane Giard – EVP, Personal and Commercial Banking said: “(Mortgage) growth has been actually more substantial on the Mortgage Development Manager (MDM) side. We’ve been adding capacity and it’s starting to pay off. So, if you look at the allocation of our mortgage business being done currently you see that in fact there was an uptick in the MDM world, so we’re still committed to working with the three channels (brokers, branches and MDMs).

RoyalBank of Canada

Net income: $2.24 billion (+73% Y/Y)

Earnings per share:$1.47

• Royal Bank’s Q3 earnings were its largest on
  record
• Residential mortgages comprised
  65% of RBC’s $264 billion retail loan portfolio (Source)
• Total value of RBC-held residential
  mortgages as at July 31, 2012 was
  $172 billion (up from $161 billion a year ago) with an
  LTV of 48%  (Source)
• Of RBC’s residential mortgage
  portfolio, 38% is insured and 62% is uninsured. (Source)
• RBC said it has a “Well diversified mortgage portfolio
  across Canada” and that it continues to conduct “Ongoing stress testing for
  numerous scenarios including unemployment, interest rates, housing prices.” (Source)
• “Our mortgage portfolio
  continues to perform well with (loss) provisions on residential mortgages remaining
  low at two basis points, consistent with our historic performance,” said Morten
  N. Friis, Chief Risk Officer at Royal Bank. “We continue to
  actually monitor this portfolio and remain confident in its ability
  to withstand significant movements in the key underlying economic parameters.”
  (Source)
• “In regards
  to margins, notwithstanding the low interest rate environment, we continued to
  achieve relative stability,” said Janice R. Fukakusa – CAO and CFO.
  “On an adjusted basis, net interest margin was relatively flat from last year
  and increased two basis points over last quarter. The sequential increase over
  last quarter reflected lower mortgage breakage costs and a favourable change in
  our product mix. Our margin performance reflects our strict pricing discipline
  as well as our ability to grow volumes that are premium to the market and
  profitably gain share.”
• “As far as the mortgage
  business, you have to expect some slowdown. We have come through a very strong
  spring mortgage season,” said David I. McKay – Group Head, Canadian Banking. “We’re extremely happy with
  our results and significant market share gains that we’ve seen. We’ll continue
  to compete. There is not a lot of evidence of the slowdown right now, but you
  have to expect with the B20 rules really kicking in, and some of the price
  appreciation that won’t be there…that those are
  some of the key drivers you’ll see [affecting] mortgage growth. You’d have to expect
  some type of slowdown from the strong, strong rates that we’re seeing today.” (Source)

Scotiabank

Net income: $2.05 billion (+57% Y/Y)

Earnings per share:$1.69

• Of Scotia’s residential mortgage portfolio, 60% is
  insured (vs. 56% in Q2), and the uninsured portion has an average loan-to-value
  ratio of 57% (vs. 56% in Q2). (Source)
• The bank’s residential mortgage portfolio totalled $153
  billion in Q3, up from $149 billion in the second quarter. Of this total, $139
  billion is related to freehold properties and $14 billion
  is related to condominiums. Residential mortgage balances are up roughly
  7.5% YoY. (Source)
• Scotia reported a $15-billion, or 7% increase in average
  assets from a year ago. This was due primarily to growth of $10 billion, or 8%,
  in residential mortgages. (Source)
• “Credit quality and performance
  of the portfolio remained strong,” said Robert H. Pitfield, Group Head and CRO of Scotiabank. “Our
  disciplined and consistent underwriting standards through all of our
  origination channels have resulted in extremely low loan losses and again have
  been stressed under many severe assumptions, which confirm our risk appetite.”
  (Source)
• “We see volume growth coming primarily from
  residential mortgages, unsecured lines of credit and credit cards,” said Anatol
  von Hahn, Group Head, Canadian Banking, noting
  Scotia expects a more moderate pace of growth in the next quarter, compared to
  Q2 and Q3.(Source)

TD Bank

Net income: $1.7 billion (+14% Y/Y)

Earnings per share:$1.78

• TD’s residential mortgage portfolio stood at $149
  billion in Q3, up from $145 billion in Q2 and $136 billion a year ago. (Source)
• 70% of the
  portfolio is insured. (Source)
• As part of the bank’s outlook, it noted: “Although interest rates will remain low and
  supportive in the near term, new rules restricting mortgage lending and
  wariness among households to take on more debt will likely lead to a slowdown
  in housing and credit demand. All said, the modest 2% growth
  environment faced by the Canadian economy of late will likely persist through
  the rest of 2012 and throughout 2013.”
  (Source)
• “Although interest rates will remain low and supportive in the near term, new rules restricting mortgage lending and wariness among households to take on more debt will likely lead to a slowdown in housing and credit demand.” (Source)

Note: Transcripts are provided by third parties like Morningstar. Their accuracy cannot be 100% assured.

Steve Huebl & Rob McLister, CMT

Last modified: October 9, 2014