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quarterly canadian bank earnings

Q2 2019 Bank Earnings – Mortgage Morsels

Canada’s big banks felt the effects of a sharply slowing economy and cooling housing market in the second quarter.

Most reported net income growth in the low-to-mid single digits. Several saw 90+ day delinquencies rise slightly in the quarter, and all of the banks, with the exception of National Bank, reported increased provisions for credit losses compared to a year ago.

As we do every quarter, we’ve picked through the Big Banks’ quarterly earnings reports, presentations and conference calls, and compiled all the mortgage notables right here. Key tidbits are highlighted in blue.



Bank of MontrealBMO

Q2 net income: $1.5 billion (+20% Y/Y)
Earnings per share: $2.26

  • BMO’s residential mortgage portfolio rose to $108.9 billion in Q2, up slightly from $108.5 billion last quarter and $106.4 billion a year earlier.
  • The HELOC portfolio—56% of which is amortizing—stands at $32.3 billion, up from $31.7 billion in Q1.
  • Mortgage growth through proprietary channels, including amortizing HELOCs, was up 4% year-over-year.
  • 44% of BMO’s residential mortgage portfolio is insured, down from 48% a year ago.
  • The loan-to-value on the uninsured portfolio is 51%, down from 54% in Q2 2018.
  • 70% of the portfolio has an effective remaining amortization of 25 years or less, unchanged from a year ago.
  • The 90-day delinquency rate was 24 bps, up from 19 bps in Q2 2018.
  • Net interest margin (NIM) in the quarter was 2.61%, unchanged from Q4 and up from 2.59% a year ago.

Source: BMO Q2 Investor Presentation

Conference Call

No mortgage-related comments of note.

Source: BMO Conference Call


Q2 net income: $1.35 billion (2.2% Y/Y)
Earnings per share: $2.95

  • CIBC’s residential mortgage portfolio fell to $201 billion in Q2, down from $203 billion in Q2 2018.
  • Of the portfolio, $27 billion is from the Greater Vancouver Area (down from $28B a year earlier), and $63 billion is from the Greater Toronto Area (unchanged from a year ago).
  • Of the uninsured portfolio, the LTV was 65%, down from 64% a year ago.
  • The bank reported $6 billion in originations in the quarter, down from $7 billion a year ago.
  • The bank’s HELOC portfolio was flat at $21.8 billion in the quarter.
  • Net interest margin in Q2 was 247 bps, up from 238 bps in Q2 2018.
  • Of the bank’s uninsured residential mortgage portfolio, 0.21% are in arrears by 90+ days, up from 0.20% in Q2 2018.
  • For insured mortgages, the arrears rate is 0.37%, up from 0.32% a year ago.
  • About 6% of the bank’s uninsured portfolio has a Beacon score of 650 or less (unchanged from last year).

Source: CIBC Q2 Investor Presentation

Conference Call

  • Commenting on the spring mortgage market so far and CIBC’s positioning within the market, Christina Kramer, VP and Group Head, Personal and Small Business Banking, Canada, said this: “We are pleased with our overall mortgage market share position. We have a strong competitive product suite and a strong advisory team… Over the last few years, a large part of our strategy to grow and deepen client relationships has been focused on large urban markets and in these markets, housing and mortgage markets were growing substantially. There was demand from clients and we were successful meeting that demand and that resulted in outsized growth relative to the market.”
  • She continued: “…our overall depth to client relationship has improved substantially in each of the last two years and that applies similarly to the clients acquired via mortgage or those clients acquired via other products or needs, meaning that the depths of relationship and our strategy is the driver, not a product-driven strategy… last year, we communicated that we would see ourselves decelerating and growing at market going forward as we saw headwinds in the markets we’re focused on. We recognize that our growth has been slower than that and that’s due to the market turning out different than we had anticipated impacting us more than our peers due to our strategic focus. In large urban markets, pullback in activity has been more pronounced and more prolonged when we assumed.
  • Finally, Kramer said, “There has also been more activities through third-party channels and as you know our focus is on direct client relationships, we haven’t actively participated in the third-party market since exiting FirstLine. And we’re also seeing increased competition. So, we remain competitive, but also disciplined on pricing, which means we’re not pursuing mortgages at any costWe’re committed to our relationship strategy and will not change course to chase accelerated mortgage growth…in terms of what are we seeing in the market, we’ve seen some pickup across Canada… B.C. is still performing slow relative to its peak, and GTA is performing a bit better.”

Source: CIBC Conference Call


National Bank of Canada

Q2 net income: $558 million (2% Y/Y)
Earnings per share: $1.51 a share

  • The bank’s residential mortgage and HELOC portfolio rose to $67.9 billion in Q2, up from $65.44 billion a year ago.
  • The bank’s residential mortgage portfolio is 40% insured, down from 43% a year ago.
  • The average LTV on the uninsured mortgage portfolio was 60%, while the average LTV on the HELOC portfolio was 58%.
  • Quebec represented 54% of the mortgage book (down from 55% from a year ago), while Ontario made up 26% (unchanged) and Alberta 8% (unchanged).
  • Net interest margin was 2.23% in Q2, unchanged from a year earlier.
  • Uninsured mortgages and HELOCs in the GTA and GTV represented 10% (up from 9% in Q2 2018) and 2% (unchanged) of the portfolio, respectively, and have an average LTV of 52% (up from 50% a year ago) and 50% (up from 44%), respectively.
  • 22.2% of the bank’s residential mortgage portfolio has a remaining amortization of 25–30 years (down from 25.5% in Q2 2018). Another 25.5% have a remaining amortization of 0–20 years.
  • The gross impaired loans ratio was 42 bps, up from 41 bps in Q1 and unchanged from Q2 2018.

Source: National Bank Q2 Investor Presentation

Conference Call

  • “…we’re pleased with the performance across our portfolios and feel well-positioned for continued prudent growth,” said Chief Risk Officer Bill Bonnell.
  • “Our credit quality is excellent. We have strong capital ratios, and cost management remains a priority throughout the organization,” said CEO Louis Vachon. “Our transformation is progressing well. We are investing strategically in our people, our brand, and in technology to position the Bank for long-term growth.”

Source: NBC Conference Call

Royal Bank of CanadaRBC

Q2 net income: $3.23 billion (6% Y/Y)
Earnings per share: $2.20

  • RBC’s residential mortgage portfolio rose this quarter to $248 billion, up from $235 billion a year ago.
  • Mortgage volume was up 5% year-over-year.
  • The bank’s HELOC portfolio fell to $39.6 billion from 40.5 billion a year ago.
  • 63% of its mortgages are uninsured, up from 42% a year ago. The average LTV on the uninsured portion is 52%, up from 51% a year ago.
  • 90+ day delinquencies in the overall residential mortgage portfolio fell to 0.19%, unchanged from a year ago. For the uninsured portion, delinquencies were steady at 0.16%.
  • The bank’s uninsured mortgage portfolio has an average FICO score of 798.
  • The average remaining amortization of RBC’s residential mortgages is 18 years.
  • Condo exposure remains about 10% of the bank’s residential lending portfolio.
  • Net interest margin was 2.80%, up from 2.79% in Q1 and 2.74% in Q2 2018.

Source: RBC Q2 Investor Presentation

Conference Call

  • President and CEO Dave McKay called the current conditions “very competitive.”
  • “Across the book, we would say Ontario is leading the way,” said Neil McLaughlin, Group Head of Personal and Commercial Banking. “It’s softer out west, both in Alberta and the prairies. And Quebec is a little bit slower. Everything else is kind of about the average.”
  • “…competition is quite fierce this time of the year,” McLaughlin added. “We are really getting into the heavy spring market. I think we do expect we will compare well versus some of our competitors. We made some changes in the business, both in terms of operational efficiencies, getting back to customers more quickly, just being more, I think, competitive on price.”
  • McLaughlin added that RBC made some changes last year in terms of process and a new digital tool that has “really” helped RBC’s retention rate. “…we are seeing all-time highs in terms of retention of the mortgage book.”

Source: RBC Conference Call


Q2 net income: $2.26 billion (3.8% Y/Y)
Earnings per share: $1.73

  • The total portfolio of residential retail mortgages rose to $217 billion in Q2, up from $210 billion in Q2 2018.
  • The portfolio comprised $188 billion in freehold properties (up from $184 billion a year ago) and $29 billion in condos (up from $26 billion a year ago).
  • Residential mortgages grew 2% year-over-year.
  • 58% of the residential mortgage portfolio was uninsured in Q2, up from 47% in Q2 2018.
  • The average LTV of the uninsured portfolio was 55%, up from 54% in Q2 2018.
  • The bank saw new originations in the quarter amounting to $8.9 billion, just shy of the $9 billion originated in Q2 2018. Meanwhile, the LTV of new originations in the quarter was 64%.
  • Net interest margin rose to 2.46%, up from 2.43% in Q2 2018.
  • 90+ day delinquencies in the residential mortgage portfolio rose to 0.21%, up from 0.19% a year ago.
  • 58% of the bank’s uninsured portfolio has a FICO score of 788 or greater. The average score is 790 nationwide, and 791 in the GTA and 795 in the GVA.

Source: Scotiabank Q2 Investor Presentation

Conference Call

  • “On the digital front, we also made progress enhancing our customer experience and increasing digital adoption rates with the launch of our fully digital end-to-end eHOME mortgage lending platform and our new mobile banking app, Nova,” noted President and CEO Brian Porter.
  • Given a slower start to the housing market in 2019, we would expect low single-digit volume growth for the year in mortgages,” Porter said about the bank’s residential mortgage portfolio.
  • “We expect margins to be stable to modestly higher for the balance of the year,” Porter added.
  • Asked about growing the bank’s declining mortgage market share in Q1, Porter replied: “I think in the broker channel, we are consistently number one or number two. And my observation on that channel as compared to some others would be that there continues to be a strong consumer preference for that channel, particularly amongst millennials. So that remains the channel that we are very, very committed to bearing in mind that we also have a direct sales force. We also have the branch channel and most recently we have both Scotia eHOME as well as Tangerine. So, lots of channels but that’s one we’re committed to because Canadians love it.”

Source: Scotiabank Conference Call

TD BankTD-Bank

Q2 net income: $3.17 billion (8.5% Y/Y)
Earnings per share: $1.7

  • TD’s residential mortgage portfolio was $194.4 billion in Q2, up from $193.9 in Q1 and $190.4 billion in Q2 2018.
  • The bank’s HELOC portfolio rose to $88.2 billion from $79.5 billion a year ago.
  • TD’s residential real estate secured lending portfolio is 67% uninsured (up from 61% a year ago) with a 54% LTV for the uninsured portion (down from 52% in Q2 2018).
  • Gross impaired loans in the residential mortgage portfolio were unchanged year-over-year at 0.13%.
  • 88% of the bank’s RESL portfolio is amortizing (up 1 percentage point from Q1) and 60% of its HELOC portfolio is amortizing (unchanged from Q1).
  • Net interest margin in the bank’s retail portfolio rose to 2.99% in Q2, up from 2.91% a year ago.
  • 51% of the bank’s residential mortgage portfolio is in Ontario, followed by the Prairies at 18%, B.C. at 19%, Quebec at 9% and just 3% in Atlantic Canada.

Source: TD Bank Q2 Investor Presentation

Conference Call

  • Asked if the bank is optimistic about future mortgage growth, Teri Currie, Group Head, Canadian Personal Banking, replied: “I continue to feel very comfortable with what we’ve been talking for quite a while now about a mid-single-digit medium-term outlook for proprietary total real estate secured lending growth. And I feel very comfortable with that for this year and going forward.”
  • On TD’s efforts to grow its mortgage business, Currie said: “We’ve been investing… more on mobile mortgage specialists, more training for our branch advisors, a leading capability that is fully digital to apply for a mortgage online. We’ve got a position, as we talked about in the past, where we’re forced in hybrid HELOC loan market share and we’re continuing to be able to advance there with customers primarily who are already customers of TD. And retention is very strong as well.”

Source: TD Conference Call

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