Tausi Insider

Canada’s housing downturn decelerated in October, with home sales rising slightly and prices levelling out. But the volume of activity was depressed and economists warned that home prices would continue to fall as borrowing costs soar. The number of resales rose 1.3 per cent from September to October, according to the Canadian Real Estate Association (CREA). That was the first rise in monthly sales since February, when Canada’s central bank was about to embark on its campaign to slash the supply of cheap money. At the same time, the national home price index fell 1.2 per cent to $777,200 from September to October after removing seasonal influences, according to CREA. That was the smallest monthly drop since June, though the eighth consecutive month of price declines. Over all, October’s activity was 15 per cent below the prepandemic monthly average. Bank of Montreal senior economist Robert Kavcic described the Canadian housing market as depressed and forecast further price decreases ...

Minister of Finance Chrystia Freeland holds a news conference on the second day of the Liberal cabinet retreat in Ottawa on Sept. 15, 2020. Sean Kilpatrick/The Canadian Press When Deputy Prime Minister Chrystia Freeland called the chief executive officers of Canada’s Big Six banks on the Sunday in February before her government invoked the Emergencies Act, CEOs stressed that the tools they had to help choke off money pouring in to support the convoy protests were limited. At that moment, banks needed court orders to freeze funds, the CEOs said, which are slow to be granted. To give banks the power to freeze funds faster, the government needed to sanction the protesters under the same anti-financial-crime laws it uses for terrorists, three CEOs said. They also urged the government to plug gaps in systems for monitoring transactions by bringing in a broader range of payments providers under stricter regulations. Accounts of at least three calls Ms. Freeland held with bank CEOs over an ...

A combination of external and internal factors made RBC's HSBC deal a reality. Duane Cole/Tausi Insider He’ll never want to admit it, but Royal Bank of Canada RY-T chief executive Dave McKay can thank Prime Minister Justin Trudeau, at least in part, for landing Canada’s most coveted bank deal in decades. Like many of his industry peers, Mr. McKay has been frustrated with Ottawa for slapping an additional, permanent tax on bank and life insurance company profits in the most recent federal budget, something Ottawa has attributed to clawing back some of the financial relief it provided during the COVID-19 pandemic. While the federal government can taketh away, it can also provide, and seven months later, another pandemic financial policy has proven to be quite helpful to RBC – even if the assistance is unintended. Because there was so much economic uncertainty when Canada entered its first COVID-19 lockdowns in March, 2020, the federal government and the country’s banking regulator ...

Bank towers are shown from Bay Street in Toronto's financial district. Adrien Veczan/The Canadian Press Canada’s major banks wrapped up their fiscal year on an uneasy note, with a boost to profit margins from rising interest rates offset by inflated costs and gradual increases in loan losses as customers start to feel the strain from higher borrowing costs. Five of the six largest lenders reported fiscal fourth-quarter profits that were flat or lower than a year ago, and three of them – Bank of Montreal, BMO-T Canadian Imperial Bank of Commerce CM-T and National Bank of Canada NA-T – fell short of analysts’ earnings estimates. The outlier was Toronto-Dominion Bank, TD-N a lender that is rich in deposits and posted large increases in the margins it earned on loans – the difference between what it charges borrowers and pays on deposits. That helped drive retail banking revenues higher. In the 2023 fiscal year, banks are expecting to be dealt a tougher economic hand. Several bank CE...

Bank towers are shown from Bay Street in Toronto's financial district. Adrien Veczan/The Canadian Press Canada’s major banks wrapped up their fiscal year on an uneasy note, with a boost to profit margins from rising interest rates offset by inflated costs and gradual increases in loan losses as customers start to feel the strain from higher borrowing costs. Five of the six largest lenders reported fiscal fourth-quarter profits that were flat or lower than a year ago, and three of them – Bank of Montreal, BMO-T Canadian Imperial Bank of Commerce CM-T and National Bank of Canada NA-T – fell short of analysts’ earnings estimates. The outlier was Toronto-Dominion Bank, TD-N a lender that is rich in deposits and posted large increases in the margins it earned on loans – the difference between what it charges borrowers and pays on deposits. That helped drive retail banking revenues higher. In the 2023 fiscal year, banks are expecting to be dealt a tougher economic hand. Several bank CE...

Bank towers are shown from Bay Street in Toronto's financial district. Adrien Veczan/The Canadian Press Canada’s major banks wrapped up their fiscal year on an uneasy note, with a boost to profit margins from rising interest rates offset by inflated costs and gradual increases in loan losses as customers start to feel the strain from higher borrowing costs. Five of the six largest lenders reported fiscal fourth-quarter profits that were flat or lower than a year ago, and three of them – Bank of Montreal, BMO-T Canadian Imperial Bank of Commerce CM-T and National Bank of Canada NA-T – fell short of analysts’ earnings estimates. The outlier was Toronto-Dominion Bank, TD-N a lender that is rich in deposits and posted large increases in the margins it earned on loans – the difference between what it charges borrowers and pays on deposits. That helped drive retail banking revenues higher. In the 2023 fiscal year, banks are expecting to be dealt a tougher economic hand. Several bank CE...

A home for sale in the Rosedale neighbourhood in Toronto on June 21, 2012. Fred Lum/Tausi Insider The share of mortgages with ultralong amortization periods has rapidly increased to about 30 per cent of home loans at some of Canada’s biggest banks, another sign borrowers are struggling with higher interest rates. At Bank of Montreal, the proportion of residential mortgages with amortization periods longer than 30 years reached 31.3 per cent last month. At Canadian Imperial Bank of Commerce the share was 30 per cent and at Royal Bank of Canada it was 27 per cent, according to the three lenders’ latest quarterly results, released this week. That is up from the end of July, when 30-year-plus mortgages accounted for one quarter of each of the three banks’ residential mortgage portfolios. And the July numbers were a significant increase from the end of April, when those loans made up 10.6 per cent of BMO’s portfolio and 12 per cent of mortgages at RBC and CIBC. In October, 2021, before t...

The CIBC headquarters in Toronto on Oct. 25, 2021. Evan Buhler/The Canadian Press Canadian Imperial Bank of Commerce CM-T could be forced to pay more than US$1-billion in damages after being found liable for losses incurred by a New York hedge fund over two debt deals dating back to the 2008 U.S. housing crisis. CIBC said Friday it intends to appeal the decision handed down by a New York State court late Thursday, which found the bank liable for damages in a case filed by Cerberus Capital Management LP in November, 2015. Banks prepare for economic turbulence after mixed annual results Canada’s Big Six banks reported fourth-quarter earnings this week. Here’s what you need to know While the court has not determined the exact amount the bank will have to pay, Cerberus has claimed damages of nearly US$1.1-billion, though CIBC said it will “vigorously dispute” that figure at a Dec. 19 hearing. CIBC said it expects to record a charge against its earnings for the first quarter of 2023, whic...

Shoppers navigate Yorkdale Mall in Toronto on Nov. 26, 2021. Tijana Martin/The Canadian Press Canadians saw their wealth tumble and their debt obligations rise substantially during the summer, as the Bank of Canada rapidly hiked interest rates in an attempt to bring inflation under control. Households made about $57.4-billion in debt payments during the third quarter, a record quarterly increase of 6.1 per cent, Statistics Canada said in a report on Monday. The interest portion of debt payments jumped by 17.8 per cent, also a record. Meanwhile, Canada’s household net worth – the value of all assets minus liabilities – fell by around $330-billion during the third quarter, following a record quarterly decline of more than $930-billion between April and June. Despite the swoon, the country’s current household wealth, at $15.1-trillion, remains about $2.7-trillion higher than it was at the end of 2019. The Bank of Canada and other central banks have been quickly raising interest rates as...

Alberta’s government-owned asset manager landed Marlene Puffer as its new chief investment officer on Tuesday, luring her away from the top job at Canadian National Railway Co.’s CNR-T pension plan. Mr. Puffer joins the Alberta Investment Management Corp. (AIMCo) at a time when the Alberta government is adding money and new clients to the $160-billion fund. AIMCo manages money for 32 groups, including civil-servant pension plans and the province’s $18-billion Heritage Savings Trust Fund. “I am delighted to have Marlene join AIMCo. She is both a fantastic addition to the company and a complement to our leadership team,” said Evan Siddall, chief executive officer of AIMCo, in a press release. Ms. Puffer will join the Edmonton-based fund manager at the end of January. Ms. Puffer was previously CEO at the $19-billion CN Investment Division, which runs the Montreal-based railway’s pension plan. She also served as vice-chair of the Healthcare of Ontario Pension Plan and worked at several p...

Governor of the Bank of Canada, Tiff Macklem, walks outside the Bank of Canada building in Ottawa. BLAIR GABLE/Reuters As the Bank of Canada nears the end of its historic interest rate-hike cycle, much of the impact of higher borrowing costs has yet to be felt in the economy. The housing market has been in a slump since the spring. But other aspects of the Canadian economy, including employment and consumer spending, have been resilient in the face of seven consecutive rate hikes. Inflation remains stubbornly high. Economists expect this to change in the coming quarters. Monetary policy tightening works with a lag, squeezing discretionary spending as homeowners renew their mortgages at higher rates, and hitting different industries with varying force and speed. Even if the Bank of Canada stops raising interest rates in its next decision in January – a possibility, according to central bank officials – the rate-hike campaign of 2022 could reverberate for months and years to come. “We ...

A person leaves a Toronto supermarket on Oct. 5. Alex Lupul/The Canadian Press Canada’s inflation rate eased slightly in November but there were signs that underlying price pressures in the economy remain strong, increasing the odds that the Bank of Canada moves ahead with another interest-rate increase in January. The Consumer Price Index rose 6.8 per cent compared with the previous year, as lower prices at the gas pump offset an acceleration in grocery prices and rent costs, Statistics Canada reported Wednesday. That’s down from 6.9 per cent in October, although slightly ahead of economist expectations of 6.7 per cent. The rate of inflation has trended down since peaking near a four-decade high of 8.1 per cent in June. But key measures of core inflation, which strip out volatile food and gasoline prices, continued to rise in November. That suggests the economy is still running hot in the face of multiple interest-rate hikes, and makes it more likely that the Bank of Canada will rai...