Canadian banks 'earn' $6.55 billion

[rideforever]

How would you phrase it?

[rideforever]

Canadian banks earn $6.55 billion

by The Canadian Press - Story: 75942
May 31, 2012 / 4:30 pm




Canada's five biggest banks posted a four per cent increase in profits during the most recent quarter, earning a combined $6.55 billion as they benefited from domestic consumer banking operations.

That's up from $6.28 billion a year ago.

But trouble could be ahead next year as tightened consumer lending habits start to erode growth at the banks.

Analysts gave a mixed response to the second-quarter earnings, which on the surface appeared stronger, but were also cluttered with a variety of other factors that clouded the fundamental results.

"There's clearly a deceleration of earnings growth," said Brad Smith, a senior financial services analyst at Stonecap Securities in an interview Thursday.

"These are not robust numbers."

Coming out on top was TD Bank (TSX:TD) which saw profits rise nearly 21 per cent to $1.69 billion, though chief executive Ed Clark warned that slowing loan growth and persistently low interest rates will impact growth in the rest of the year.

Loans are expected to be a crux for the banks in coming quarters as more Canadians hit the ceiling on what they can afford.

"Canadians are leveraged at unusually high levels, and they can get away with it because the cost of debt is low," said Peter Routledge, an analyst at National Bank Financial.

Numerous studies have found that household debt is on the rise. A quarterly report from TransUnion released Thursday suggests that consumers are on average $432 deeper into debt than they were a year ago, affected particularly by growth in car loans.

"Once you get to a certain level of debt, either banks will not be willing to lend, or consumers won't be willing to borrow," said Routledge.

"There's sort of an upper limit, and the Canadian households are approaching it."

Routledge said banks will also have to contend with more revenue volatility linked to instability in Europe.

Banks have been making changes with their internal operations that could help mitigate the brewing troubles. Bank of Montreal (TSX:BMO) and CIBC (TSX:CM), for example, were both tightening their expenses in the quarter.

Bank of Montreal (TSX:BMO) profits rose 27 per cent to nearly $1.03 billion, an increase of $215 million from a year ago, or $1.51 per share before adjustments.

Canadian Imperial Bank of Commerce earnings rose six per cent to $811 million as it earned $1.90 per diluted share. The results are up from $767 million or $1.80 a share in the same period last year.

Others received an earnings boost from recent acquisitions, such as Scotiabank (TSX:BNS) which saw its international operations benefit from the addition of Banco Colpatria in Colombia. The bank still reported that profit declined nearly 10 per cent to $1.46 billion, or $1.15 per diluted share, compared with $1.62 billion, or $1.39 per share a year earlier.

Royal Bank of Canada (TSX:RY) completed its own acquisition in the period, though it negatively affected profits. The bank said the acquisition of the remaining half of advisory firm RBC Dexia left a $202-million dent in earnings.

The country's biggest bank said Thursday that net income from continuing operations dropped to $1.56 billion, or $1.01 per share, down from $1.68 billion or $1.10 per share a year ago.

Those temporary impacts only glaze over the bigger picture, said Dan Werner, a Morningstar bank analyst based in Chicago.

"You've got to dig through and see what's really going on in the core numbers," he said.

"There are some things to point out here that foretell it's going to be a little tougher for Canadian banks to grow earnings like they did say two or three years ago."

[GrooveTunes]

"There are some things to point out here that foretell it's going to be a little tougher for Canadian banks to grow earnings like they did say two or three years ago."

http://www2.macleans.ca/2012/05/24/the-real-canadian-bank-bailout/

I think they should send everyone a cheque for the use of our money to make billions.

[Captain Awesome]

Good for them.

[The Green Barbarian]

I think they should send everyone a cheque for the use of our money to make billions.

They do every quarter. It's called a "dividend". And before you get all high and mighty about how "most" people aren't "wealthy" and therefore can't receive dividends as they can't afford bank shares (totally bogus argument anyway, just read the Wealthy Barber) you would be surprised to find out that every Canadian who collects CPP, or one day will collect CPP, benefits, as the CPP owns bank stocks. So our banks are great wealth generators, and if you don't want them to make money off of "your" money, then go to a Credit Union, or better yet, don't go into debt at all. Everyone wins, easy peasy, and much less whining, crying and complaining.

[rideforever]

the CPP owns bank stocks. So our banks are great wealth generators,
...
if you don't want them to make money off of "your" money, then go to a Credit Union, or better yet, don't go into debt at all.

How does going to a credit union or not going into debt stop them from making money off our CPP?

More importantly, how do we stop them from making risky investments with our CPP? They seem happy to invest our money in things that are too risky for essential savings. I guess that's what happens when they reap the benefits of these risks without suffereing the consequences when their risks come back to bite us. Their risks caused a recession and lost a bunch of our money while they took enormous bonuses.

Would you be happy if I gambled your money and lost some of it and then took profits for all the hard work and 'smart' moves I made with your money?

[The Green Barbarian]

How does going to a credit union or not going into debt stop them from making money off our CPP?

Wow. OK - one more time - the CPP makes money off of bank stocks. They own bank stocks. Banks pay dividends. The dividends in turn are paid out to people who collect CPP. This isn't that hard to understand. I wish in school they spent as much time on understanding economics, dividends and stock market functioning as they do on teaching kids how boys dressing up as girls somehow helps empower girls in the third world. If they stopped with all of the "social justice" nonsense maybe kids wouldn't have their heads filled with garbage about how banks are bad, "big business" is bad, all oil companies are "dirty" and earning money makes you "greedy". Good grief. This isn't that hard to understand, but if all you've been taught is to see everything through the dirty deranged leftist prism, then I guess it is really hard to comprehend.

Their risks caused a recession and lost a bunch of our money while they took enormous bonuses.

I am so tired of people in this country not comprehending that there is a border between us and the US, and so therefore, whatever happened in the US must have happened here. Oh wow. Just wow. This happened in the US, not Canada. We live in Canada. I know the US stuff fits with the idiotic propaganda that the CCPA and other leftist nutter institutions are feeding you, but they are liars. Plain and simple. Liars. Please wake up.

[Captain Awesome]

More importantly, how do we stop them from making risky investments with our CPP?

Banks do not make risky investments with your money (if you have any).

[logicalview]

Would you be happy if I gambled your money and lost some of it and then took profits for all the hard work and 'smart' moves I made with your money?

I suspect that you would though.

[grammafreddy]

All the trade unions in Canada also invest in Canadian bank stocks, too. Most Canadian mutual funds invest in bank stocks - in Canada and the US. As well, almost all, if not all, RRSPs have stock in the Canadian and American banks in their investment portfolios.

I wish in school they spent as much time on understanding economics, dividends and stock market functioning as they do on teaching kids how boys dressing up as girls somehow helps empower girls in the third world. If they stopped with all of the "social justice" nonsense maybe kids wouldn't have their heads filled with garbage about how banks are bad, "big business" is bad, all oil companies are "dirty" and earning money makes you "greedy". Good grief. This isn't that hard to understand, but if all you've been taught is to see everything through the dirty deranged leftist prism, then I guess it is really hard to comprehend.

I sure do agree with this ... by the time a kid finishes high school they should have some kind of comprehension about banking, saving, investing and growing their incomes. Not all kids go on to take economics courses in college. If they started teaching economics in Grade 3 and increased the complexity of it until graduation, kids might have a fighting chance at managing their incomes better and with a great deal more intelligence than what they come out of high school with now.

[twobits]

Banks do not make risky investments with your money (if you have any).

And therein lays the truth. The people that do the most complaining about other people making money are usually the ones that have none.

[The Green Barbarian]

And therein lays the truth. The people that do the most complaining about other people making money are usually the ones that have none.

what's sad is that there are so many ways for people to participate in the buying and selling of bank stocks, but they'd rather feel sorry for themselves and cry about how "only the rich" get to buy bank stocks. This just isn't true. I don't drink much, but I do help out people with bottle drives and stuff so I go by the bottle recyclers on Kirschner (Columbia Bottle Depot) and see just how much people drop off in bottles and many times I'm just like WOW! there's like 10 shares of Royal Bank right there if you had spent the money on investing rather than those big 40 pounders of booze. And the thing about bank stocks is, if you put them in a DRIP (Dividend reinvestment program) it's amazing how fast your shares accumulate. It's really not that hard, but it saddens me that nothing about compound interest and dividend reinvestment is taught to our kids. Instead, they're just told that everyone who plans ahead and thinks about investing in the stock market is "greedy" and all the big corporations don't pay enough taxes. That's just bunk, and wrong.

[Nebula]

Green, I suspect the majority of people with pensions and/or RRSPs don't know where their money is. I suspect there are people out there who think after they put some money in an RRSP account, some nice guy comes by every quarter and puts a few dollars in the account and that's how the balance grows.

[The Green Barbarian]

Green, I suspect the majority of people with pensions and/or RRSPs don't know where their money is. I suspect there are people out there who think after they put some money in an RRSP account, some nice guy comes by every quarter and puts a few dollars in the account and that's how the balance grows.

Good point! I didn't even touch on the millions of Canadians with RRSP's whose main holdings are mutual funds, which is a smart investment for most people who don't want to spend the time doing their own research, and want to just trust professional money managers. Almost all mutual funds, be they "growth, equity, balanced or income", hold bank stocks. So directly or indirectly, millions upon millions of Canadians benefit from the dividends that banks distribute quarterly. If you don't own bank stocks, you are missing out big time on a great investment.

[goalie]

It's not hard to make hand over fist when you are a chartered Bank.