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Year-End Bank Earnings – Mortgage Morsels

Bank-roundupSure, you paid out the nose in interest charges and assorted bank fees this year, but take comfort in knowing that you helped pad the Big 6 Banks’ bottom lines—to the tune of $33 billion of net income in 2014.

That enabled Canada’s banks to post a reasonably strong year, despite a modest spring housing market and the continued low interest rate environment.

On the mortgage end of things, loan losses were down and most of the majors saw their ratio of insured mortgages fall—not surprising given Ottawa’s push to de-risk its mortgage exposure. As of October, banks had grown their mortgage books by 4.8% year-over-year.

As we do every quarter, CMT has dug through the Big 6 Banks’ quarterly earnings reports, presentations and conference calls, and pulled together these mortgage tidbits. The more notable observations are in blue.


Bank of Montreal


Q4 net income: $1.07 billion
(<1% Y/Y)
Earnings per share: $1.56
2014 net income: $4.33 billion

  • BMO’s residential mortgage book grew 6% YoY and 2% QoQ. (Source)
  • BMO’s total Canadian residential mortgage portfolio stands at $93.0 billion, up 1.4% from $91.7 billion in the previous quarter. (Source)
  • 63% of BMO’s portfolio is insured, down from 64% in the previous quarter. (Source)
  • The loan-to-value on the uninsured portfolio is 58%, unchanged from Q3. (Source)
  • The condo mortgage portfolio stands at $13.3 billion (up from $13 billion in Q3) with 54% insured (unchanged from Q3). (Source)
  • The loss rate for the trailing four-quarter period was less than 1 bp. The 90-day delinquency rate was 27 bps, unchanged from Q3. (Source)



Q4 net income: $911 million
-1.7% Y/Y
Earnings per share: $2.24
2014 net income: $3.7 billion

  • CIBC’s residential mortgage portfolio rose to $152 billion in Q4, up from $149 billion in Q3. (Source)
  • CIBC brand mortgage balances grew 14%, or 12% excluding the benefit from FirstLine conversions. (Source)
  • Condos accounted for 11% ($17 billion) of the total Canadian mortgage portfolio. (Source)
  • The bank’s residential mortgage portfolio was 67% insured (down from 70% in Q3). Ninety percent of that insurance was provided by CMHC. (Source)
  • Of CIBC’s uninsured portfolio, the average LTV was 60% (Source)
  • “The conversion of FirstLine mortgages into CIBC brand continues to grow very well. Since we stopped originating broker mortgages in the FirstLine channel in July of 2012, $81 billion or 65% of the portfolio has runoff. Of that amount, we have retained approximately 50% into our own brand mortgage portfolio,” said Kevin Glass, Chief Financial Officer. “We are optimistic that we will continue to maintain current retention levels as the balance of the portfolio runs off.” (Source)
  • Asked if the benefit from the bank’s exit of the mortgage broker channel has finally run its course, David Williamson, Senior EVP and Group Head, Retail and Business Banking, said, “…The FirstLine runoff and conversion over to CIBC…is a lift. So that’s kind of helping us each quarter. That’s not huge, but it’s a net tailwind for sure…We are net, net growing in mortgages…We’ve got a mix shift, mortgages being an important product but not the highest spread product.” (Source)


National Bank of Canada

Q4 net income: $407 millionNBC
(+15% Y/Y)
Earnings per share: $1.14 a share
2014 net income: $1.6 billion

  • Residential mortgages rose 7% YoY to $39.3 billion as of October 31, 2014. (Source)
  • Personal Banking’s total revenues rose $22 million, mainly due to higher loan volume, “particularly mortgage loans and home equity lines of credit.” (Source)
  • “66% of the bank’s credit portfolio is based in Quebec, 19% in Ontario and 15% in the other provinces…Residential mortgages in Toronto and Vancouver represent approximately 13% and 2%, respectively…Insured mortgages are still the largest asset in the book, accounting for 34% of the portfolio. HELOCs and uninsured mortgages represented 26% and 18%, respectively.” (Source: Q4-2014 Conference Call)
  • The average loan to value on the HELOC and uninsured mortgage portfolio was approximately 59% and 58%, respectively.” (Source: Q4-2014 Conference Call)
  • The latest available data from D+H shows National Bank ranked 9th in broker channel market share, with approximately 4% of the market.


Royal Bank of CanadaRBC

Q4 net income: $2.33 billion
(+11% Y/Y)
Earnings per share: $1.57
2014 net income: $9 billion

  • RBC’s residential mortgage portfolio rose to $192 billion in Q4, up from $189 billion in Q3. (Source)
  • 60% of its mortgages are uninsured while 40% are insured. (Source)
  • The bank repeated that it follows “strong underwriting practices resulting in continued low loss rates and stable delinquency rates with good LTV coverage and low exposure to condo market.” (Source)
  • RBC’s condo exposure is 9.5% of its mortgage portfolio, representing approximately $4 billion. (Source)
  • “We’ve been investing heavily in technology for the past 5 or 6 years. We’ve recently put in a new mortgage system, a new data centre and we’ve invested in our commercial lending systems. These costs are already built into our run rate,” said David McKay, President and CEO. (Source)
  • “…on this oil price point … We are able to monitor at even a community type basis of where our exposures are. So far we have not seen outstandings or delinquencies increase in, say, the Alberta region. But that is part of our early warning signal approach. So we are monitoring that as well,” said Mark Hughes, Chief Risk Officer. (Source)



Q4 net income: $1.44 billion
(-14% Y/Y)
Earnings per share: $1.10
2014 net income: $7.3 billion

  • The total portfolio of residential retail mortgages was unchanged at $189 billion in the quarter. (Source)
  • 52% of the residential mortgage portfolio was insured in the fourth quarter, unchanged from Q3. The uninsured portfolio has an average loan-to-value ratio of approximately 54%, down from 55% in the previous quarter. (Source)
  • “The net interest margin was up 2 basis points year-over-year driven primarily by higher mortgage spreads and growth in credit card balances, partly offset by lower spreads on deposits.” (Source)
  • “Excluding Tangerine’s run-off (mortgage) portfolio, loans grew 5%, mainly driven by mortgages.” (Source)
  • The portfolio consists of $169 billion in freehold dwellings and $20 billion in condos (unchanged from Q3). (Source)
  • The latest available data from D+H shows Scotiabank ranked 1st in broker channel market share, with approximately 17.7% of the market.


TD BankTD-Bank

Q4 net income: $1.86 billion
(+8% Y/Y)
Earnings per share: $0.98
2014 net income: $7.45 billion

  • TD’s residential mortgage portfolio rose to $173 billion, up from $168 billion in the previous quarter and $163 billion in Q4 2013. (Source)
  • The bank reported real estate secured lending growth of 4% YoY, up from 3% in the previous quarter. (Source)
  • 62% of the portfolio is insured, down from 63% in the previous quarter. The loan-to-value of the uninsured portfolio is 60%, down from 61% in Q3. (Source)
  • 72% of the bank’s condo mortgages are insured, down from 73% in the previous quarter. (Source)
  • “Hi Rise Condo Developer Exposure represents 1.7% of the Canadian commercial portfolio.” (Source: BMO Capital Markets)
  • The latest available data from D+H shows TD Canada Trust ranked 5th in broker channel market share, with approximately 8.7% of the market.

Note: Transcripts are provided by a third party (Seeking Alpha). Their accuracy cannot be 100% assured.

Rob McLister & Steve Huebl, CMT