Something to Think About…..
We have all heard how the Canadian Government has mandated changes to our Mortgage guidelines and they continue to imply there may be further changes down the road. Over and over we hear cautionary tales of potential Housing Bubbles and how the Government must take precautionary measures or else risk having a potential financial collapse similar to the U.S. and other Countries. Interesting to note that if you dig just a little bit their seems to be a completely contradictory theme of profit for the 5 Big Canadian banks that not only does not infer an imminent collapse of our Canadian Banking Institutions but makes you wonder what is going on.
FACT: “Moody’s Investors Service Inc. recently downgraded the credit ratings of several of the country’s largest banks, saying that high housing prices and record levels of consumer debt have left them vulnerable to a slowing Canadian economy”
Reported by The Globe and Mail, January 29th 2013.
Among other moves, the bond-rating agency took away Toronto-Dominion Bank’s triple-A rating. TD, which was the last Canadian bank to enjoy the highest-possible rating until January 29th 2013, was downgraded over concerns about the increasing size of its U.S. operations, where the bank faces more competition than in Canada
Moody’s also lowered the ratings of five other financial institutions by one notch: Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, and Caisse Centrale Desjardins.
The downgrades by Moody’s were not a major surprise after competing agencies began downgrading Canadian banks over the past year, starting with Royal Bank of Canada in June, owing to worries about slowing growth in the banking sector, and persistent low interest rates that are crimping revenue.
Full Article can be read here: http://www.theglobeandmail.com/globe-investor/moodys-knocks-canadian-banks-down-a-notch/article7910438/?service=mobile
FACT: “It’s been a surprisingly good week for shareholders of Canada’s five biggest banks”
Reported by CBC News, On August 30th 2012
All reported higher third-quarter profits — up 45 per cent from the same quarter last year — as they collectively reported net income of $7.8 billion. The profits were so healthy that they all soared past estimates from analysts – number crunchers who do nothing but follow the sector.
A good week, too, because all five also boosted their quarterly dividends. In BMO’s case, it was the first dividend boost in five years. People who follow the banking industry were trying to remember the last time all five boosted dividends at the same time.
The surprise in all the bank earnings announcements this week comes from the unexpected juxtaposition of surging profits and boosted dividends at a time when the entire banking industry is supposed to be facing a “tough operating environment,” as TD’s chief executive Ed Clark put it.
Banks supposedly don’t like rock-bottom interest rates. Too hard to make money. They don’t like it when consumers start to scale back their demands for credit, which they appear to be. We’re starting to see signs of a cooling housing market, where Canada’s banks hold millions of mortgages. Margins in some cases have been shrinking. The growth in the economy can best be described as modest. They all have exposure to the U.S. market, where conditions remain challenging.
Confidence amid caution
Yet here we have banks boosting dividend payouts – a vote of confidence that the banks don’t expect that a weakening economy will seriously derail their business models. After all, banks are loath to cut their dividends. None of the big five banks has cut a dividend since the Second World War.”
Full Article Can Be Read Here: http://www.cbc.ca/news/business/story/2012/08/30/banks-profits-dividends.html
FACT: Royal Bank reports record annual profit of $7.5 billion
The Royal Bank says it had a record annual profit in 2012, including $1.9 billion of net earnings in the fourth quarter.
Full Article Can Be Found Here: http://www.thestar.com/business/2012/11/29/royal_bank_reports_record_annual_profit_of_75_billion.html