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Q2 2021 Bank Earnings – Profits Soar as Loss Provisions Plunge

The Big 6 banks saw profits soar in the second quarter thanks to strong mortgage growth and massive loan-loss provision reductions.

Three of the banks saw net income more than double, while CIBC posted 320% year-over-year growth.

Executives weighed in on a variety of topics, including current market conditions that have seen home prices soar over 38% in the past year, falling loan-loss provisions and the recent tightening of the stress tests for insured and uninsured mortgages.

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: $1.3 million (+87% Y/Y)
Earnings per share: $3.13

  • BMO’s residential mortgage portfolio rose to $122.5 billion, up from $114.5 billion a year earlier.
  • The HELOC portfolio—67% of which is amortizing—rose to $38.2 billion from $34.6 billion a year ago.
  • 36% of BMO’s residential mortgage portfolio is insured, down from 41% a year ago.
  • The loan-to-value on the uninsured portfolio is 54%, down from 55% a year ago.
  • 79% of the portfolio has an effective remaining amortization of 25 years or less, unchanged from a year ago.
  • Net interest margin (NIM) in the quarter was 2.66%, down from 3.51% in Q1 2021.
  • Provisions for Credit Losses (PCL) on impaired loans was $155 billion in Q2, down from $215 billion in Q1 and $413 billion in Q2 2020.
  • The 90-day delinquency rate “remains good” at 17 bps, down from 22 bps a year ago, with the loss rate for the trailing four-quarter period at 1 bp.

Source: BMO Q2 Investor Presentation

Conference Call

  • “Performance was supported by continued strong mortgage growth and a resumption of commercial lending growth,” said President and CEO Darryl White.
  • Asked about revenue from mortgage prepayments, Ernie Johannson, Group Head, North American Personal and Business Banking, said this: “Consumers are taking advantage of a lower interest rate environment to refinance…this will be a phenomena that continues as we have low interest rates. Do I anticipate it to diminish? I think over the coming months, you will see that…consumers…who were interested in taking advantage of making payments have done so. And then also as we go forward, we’re going to see increased spend…
  • “The vast majority of what’s left on deferral is mortgages, so I don’t expect those delinquency numbers to actually change a whole lot,” said Pat Cronin, Chief Risk Officer. “…we’ll watch it carefully as we go, but so far we’re seeing pretty good signs.”
  • Asked about the impact of rapidly rising home prices from a credit risk standpoint, Cronin said, “With existing homeowners, that has the effect of actually improving LTV, so that’s a credit positive. We are looking, though, very carefully at existing originations. The elevated home prices may exaggerate LTVs and so…through the cycle, as prices change, we adjust our practices.
  • Cronin added: “And, we’re routing more mortgages to manual adjudication, particularly where we’re looking at areas where we’ve seen rapid house price appreciation, just to make sure that we’re comfortable, but ultimately, our mortgages and loans are to the borrower’s ability to pay, not the house price. And so to the extent we’re satisfied with that, then we’re comfortable from a risk perspective.”
  • Asked about the more stringent stress test, Johannson said, “The impact will be, probably about 5% to 10%, max, from the perspective of impacted borrowers. That said, there are ways in which they can obviously find a lower priced house, being able to either, find more equity somewhere from parents and gifting and all those sorts of good things…but we can assume…that there will be some moderation. That would be our expectation over the next little while, but it will still remain a fairly robust mortgage market in Canada for sure over the next little while.”

Source: BMO Conference Call


Q2 net income: $1.65 billion (320% Y/Y)
Earnings per share: $3.55

  • CIBC’s residential mortgage portfolio rose to $226 billion in Q2, up from $204 billion in Q2 2020.
  • Of the portfolio, $29 billion is from the Greater Vancouver Area (up from $27 billion a year earlier), and $73 billion is from the Greater Toronto Area (up from $64 billion a year ago).
  • Of the uninsured portfolio, the LTV was 51%, down from 54% a year ago.
  • The bank reported $20 billion in originations in the quarter.
  • The bank’s HELOC portfolio ended the quarter at $18.6 billion, down slightly from the previous quarter and down from $20.3 billion a year ago.
  • Net interest margin in Q2 was 239 bps, down from 250 bps in Q2 2020.
  • Provisions for credit losses totalled $32 million ($26 million) last quarter. Analysts estimated C$245.4 million in provisions, on average.
  • Gross impaired loans (90+ days delinquencies) were down to 0.25% in the quarter, down from 0.27% in Q1 and 0.32% a year ago.

Source: CIBC Q2 Investor Presentation

Conference Call

  • Part of CIBC’s volume growth was attributed to the bank’s focus on “acquiring new clients, deepening relationships with existing clients, adding mobile mortgage advisors in key markets and enhancing our cards value proposition,” said Victor Dodig, President and CEO.
  • “…on mortgages, as you’ve seen, growth continues to be strong…we have a good pipeline of activity. So that gives us confidence that we’re going to continue to have good momentum in the back half of 2021,” said Laura Dottori-Attanasio, Senior EVP and Chief Risk Officer.
  • Asked about the impact of the stricter stress test on insured and uninsured mortgages, Dottori-Attanasio said “the impact could be 5%, maybe 10% on originations.”
  • “Nearly 2/3 of our outstanding loans are to consumers, the majority of which are mortgages,” said Shawn Beber, Chief Risk Officer.
  • “While our models indicated a larger reversal in performing provisions, we continue to exercise judgment in offsetting a portion of those reductions, reflecting ongoing uncertainty,” Beber added.

Source: CIBC Conference Call


National Bank of Canada

Q2 net income: $801 million (+111% Y/Y)
Earnings per share: $2.25 a share

  • The bank’s residential mortgage and HELOC portfolio rose to $84.8 billion in Q2, up from $72.4 billion a year ago.
  • The bank’s residential mortgage portfolio is 35% insured, down from 39% a year ago.
  • The average LTV on the uninsured mortgage portfolio was 57%, while the average LTV on the HELOC portfolio was 53%.
  • Quebec represented 55% of the mortgage book (unchanged from a year ago), while Ontario made up 27% (up from 26%) and Alberta 7% (down from 8%).
  • Net interest margin was 2.16% in Q2, down from 2.22% a year earlier.
  • NBC recorded provisions on credit losses of $5 million versus analysts’ estimates of $81 million.

Source: National Bank Q2 Investor Presentation

Conference Call

  • The real estate market continues to be strong, which gives us good momentum in mortgage growth with volumes up 9% year-over-year,” said Louis Vachon, President and CEO. “More than half of our originations are still in Quebec where fundamentals continue to be very strong.”
  • Asked about the impact of inflation on the bank’s mortgage portfolio, Ghislain Parent, Chief Financial Officer, said,“If we have a moderate increase in inflation, I think that’s quite good for the Canadian economy, I think that would be quite good for the banking industry generally. So that’s how we would approach it. Now, a large increase in inflation, which would bring a large increase in interest rates [and] would bring probably a different outcome. But right now I think we still perceive that as a low probability event or scenario.”

Source: NBC Conference Call

Royal Bank of CanadaRBC

Q2 net income: $4 billion (+171% Y/Y)
Earnings per share: $2.79

  • RBC’s residential mortgage portfolio rose this quarter to $303.3 billion, up 10.7% from $274 billion a year ago.
  • The bank’s HELOC portfolio fell 6.6% to $35.2 billion from $37.7 billion a year ago.
  • 70% of its mortgages are uninsured, down from 71% a year ago. The average LTV on the uninsured portion is 51%, down from 52% a year ago.
  • 90+ day delinquencies in the overall residential mortgage portfolio fell to 0.16% from 0.17% a year ago (0.13% for uninsured mortgages).
  • The bank reported a ~90% mortgage retention ratio.
  • 75% of RBC’s mortgage clients had an existing relationship with the bank before seeking mortgage funding.
  • 90% of RBC’s mortgage clients have more than one financial product with the bank.
  • The bank’s uninsured mortgage portfolio has an average FICO score of greater than 802, up from 783 in Q2 2020.
  • Net interest margin was 2.55%, down from 2.70% in Q2 2020 “primarily due to lower interest rates.”

Source: RBC Q2 Investor Presentation

Conference Call

  • In his opening remarks, President and CEO David McKay said, “With respect to Canadian housing, we continue to monitor supply demand imbalances across Canada, and we support recent actions taken by regulators to adjust mortgage stress tests to take some pressure off the demand side of the equation. While we encourage policymakers to also address the problems of limited supply, which are exacerbating house price inflation.”
  • McKay added, “we manage risk through a cycle, and the credit metrics of our most recent mortgage originations remain strong and are consistent with our existing high-quality portfolio.”
  • “We made early and continuous investments in our distribution network, and client-facing talent, including mortgage specialists, commercial account managers, and investment advisors.,” McKay said. “The combination of these investments over a number of years is driving better outcomes for our clients, strong volume growth, deeper client relationships and increasing scale and profitability.”
  • On client loyalty, McKay had this to say: “65% of our Canadian banking clients have more than just a transaction account with us, many of which also end up getting a credit card, a mutual fund, or a mortgage. Our mortgage relationships have higher retention rates for these multi-product clients, with mortgage profitability up roughly two times higher when a client is retained for a second term.
  • RBC noted it had “higher-than-average mortgage prepayment revenue.”
  • “We are seeing positive trends in many of our three key credit indicators,” said Graeme Hepworth, Chief Risk Officer. “Watch lists are declining, upgrades are overcoming downgrades, and delinquency trends are stable.”
  • Asked if RBC is intentionally “tapping the breaks” on mortgage growth, Neil McLaughlin, Group Head, Personal and Commercial Banking, said “we’ve been growing the mortgage business in double digits for over a year now and still consider it to have tremendous momentum…We have zero concern…in terms of our ability to continue to grow share in the mortgage business.

Source: RBC Conference Call


Q2 net income: $2.46 billion (+86% Y/Y)
Earnings per share: $1.88

  • The total portfolio of residential retail mortgages rose to $257 billion in Q2, up 18% from $218 billion in Q2 2021.
  • Net interest margin fell to 2.26%, down 7 bps from Q2 2021 due to a “change in business mix and Bank of Canada rate cuts.”
  • Mortgage loans that were 90+ days past due fell to 0.16% from 0.21% a year ago.
  • Scotia reported provisions for credit losses of 1% (as a percentage of its average net loans), down from 4% a year ago.
  • The bank reported that residential mortgage volumes were up 8% year-over-year.

Source: Scotiabank Q2 Investor Presentation

Conference Call

  • We expect continued growth in mortgages and commercial lending in the second half of the year,” said Raj Viswanathan, Chief Financial Officer.

Source: Scotiabank Conference Call

TD BankTD-Bank

Q2 net income: $3.7 billion (+147% Y/Y)
Earnings per share: $1.99

  • TD’s residential mortgage portfolio was $220.5 billion in Q2, up from $202.9 billion in Q2 2020.
  • The bank’s HELOC portfolio rose to $97.7 billion from $91.8 billion a year ago.
  • TD’s residential real estate secured lending portfolio is 75% uninsured (up from 71% a year ago) with a 52% LTV for the uninsured portion (down from 54% in Q2 2020).
  • Net interest margin in the bank’s retail portfolio fell to 2.61% in Q2, down 22 bps from a year ago.
  • 53% of the bank’s real estate secured lending portfolio is in Ontario (up from 52% a year ago), followed by B.C. at 19%, the Prairies at 16%, Quebec at 9% and just 3% in Atlantic Canada.
  • Provisions for credit losses in Q2 were down by $179 million from the previous quarter.
  • Gross impaired loans in the Canadian retail portfolio fell to 0.10%, down from 0.17% a year ago.

Source: TD Bank Q2 Investor Presentation

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