How the Banks Turn a Profit in a Tough Economy (Hint: That Money Has to Come From Somewhere)

A little over a month ago I wrote this post in response to the Bank of Canada lowering the overnight lending rate by 0.25%, and the major banks’ lackluster response – namely, a measly 0.15% cut of their prime lending rate for consumers. As I mentioned, this was a slap in the face to Canadians across the country, who deserve a prime lending rate on par with the BoC’s cut for the banks.

To drive this point home, I thought I’d share this article from Steve Huebl and Robert McLister (who I quoted in that previous post), summarizing the profits of the Big 6 Banks over the first quarter of 2015. In fact, the first sentence is really all you need to know: “Canada’s big banks defied expectations for first-quarter earnings, despite the collapse in oil prices and its spinoff effects on consumer credit.”

Since quarter 4 of 2014:

  • BMO’s residential mortgage portfolio has gone up from $90.0 billion to $90.1 billion.
  • CIBC’s residential mortgage portfolio has gone up from $152 billion to $153 billion.
  • National Bank of Canada’s residential mortgages have gone up to $40 billion (from $37.7 billion the year previous).
  • RBC’s residential mortgage portfolio has gone up from $192 billion to $194 billion.
  • Scotiabank’s residential mortgage portfolio has remained even at $189 billion.
  • And lastly, TD’s residential mortgage portfolio has gone up from $173 billion to $175 billion.



There are plenty more stats in the article worth checking out, but the takeaway is this: the economic hardship in this country isn’t enough to slow the banks’ pursuit of profit. Their earnings have almost all risen in a time when our central bank has practically mandated they cool down. David McKay, President and CEO of RBC, is quoted as saying this about his bank’s decision not to follow the BoC overnight lending rate cut: “We are very happy with our volume growth and our revenue growth and our margins in a difficult operating environment around competition and lower rates. So I think it’s good performance by the business.”

As far as I’m concerned, good business doesn’t start and stop with maximizing profits. Good business means forming good consumer relationships that benefit both parties – and that’s the spirit with which I run Lori Lalonde Mortgages. And if that sounds better to you than getting taken for a ride by the bank, then I encourage you to give me a call at (250) 782-9665. Let’s do good business together.

Lori Lalonde, Your Northern BC Mortgage Broker

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