Canada’s banks finished 2021 strongly, with the biggest five banks aggregating more than $43bn in profits. After a slight dip in net income in 2020, the rebound can be attributed to a buoyant economy, strong asset growth and a mortgage boom.
In the fiscal year that ended in October, the country’s largest bank by Tier 1 capital, Royal Bank of Canada (RBC), chalked up $12.7bn in profits, while second-largest Toronto Dominion (TD) Bank saw $11.3bn in profits. Scotiabank, Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce also recorded profits of $7.9bn, $6.1bn and $5.1bn, respectively.
On the back of strong results, Canadian banks have continued to look for expansion opportunities south of the border. In a recent deal, BMO agreed to buy BNP Paribas’s US unit, Bank of the West, for $16.3bn in December, a move which will double its US retail operations. RBC and TD are also looking to build on their success in the US market.
However, according to a Fitch Ratings report in early December, Canadian banks will have to navigate a number of cross-currents in 2022. “Strong asset quality, growth in unsecured consumer and commercial loans, plus higher rates, will support earnings. However, fee income will continue to decline from recent peaks and banks will face increased downside risks related to housing,” the report stated.
