Canada’s biggest bank has topped the table in profitability and overall performance. Marie Kemplay reports.

It has generally been a solid year for Canada’s banks in the Top 1000 World Banks ranking, with all but one seeing their pre-tax profits increase in 2021; a clear improvement compared to the year previous, when all but one had decreased profits.

The one outlier, Montreal-based Laurentian Bank of Canada, saw a 35% year-on-year reduction in pre-tax profits. It recorded one-time charges in the fourth quarter of 2021 related to its strategic review, including reducing the office space it leases and amended plans for its core-banking technology system.

Canada’s six largest banks saw their pre-tax profits increase from 23.4% for co-operative Desjardins Group, through to 82.5% for Canadian Imperial Bank of Commerce. Tier 1 capital has also increased by double-digits at five out of the six — the exception being Desjardins, which saw 8.1% growth in Tier 1 capital.

Canada’s banks have benefitted from state support that bolstered the economy against the worst impacts of the Covid-19 pandemic and which, to date, has meant that loan losses have been less severe than initially feared. All six have also seen their return on capital (ROC) and return on asset (ROA) ratios improve compared to last year.

Royal Bank of Canada (RBC) has comfortably maintained its position as the country’s largest bank by Tier 1 capital, with $66.33bn, a 19.2% increase year-on-year. It also achieved an impressive 53.8% rise in pre-tax profits, the second-highest ROC at 19.51% and the second-highest ROA at 0.94%.

This has enabled RBC to score top marks for profitability in The Banker’s best-performing banks analysis, which examines performance across a combination of factors that include asset quality, operational efficiency and leverage. The bank comes out on top among its peers for overall performance, while also performing well in return on risk, asset quality and leverage.

Scotiabank, Canada’s third-largest bank by Tier 1 capital, has placed second for overall performance — a big jump compared to last year when it was at the bottom of the table. This is in large part down to its strong performance in operational efficiency, which examines cost-to-income ratio performance. The bank has been engaging in major, multi-year digitalisation efforts, which seem to be paying off.

It is Canada’s fourth-largest bank, Bank of Montreal, which has come out in third position in the overall best-performing table. Although it did not come top in any individual performance indicators, it came in second place for growth, liquidity and soundness.

For Desjardins, which placed sixth in the country ranking and performance table, it was actually a steady year with increased pre-tax profits. However, it was outgunned by its peers on profitability, return on risk and liquidity, where it placed last in each category, as well as placing fifth for growth, operational efficiency and asset quality. It is important to note, however, that Desjardins topped the table for soundness and leverage.

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