Economic Expectations – Canadian Banks Believe in the Country’s Consumers

Big banks see strong savings and high employment rates as core financial strengths

Even with global inflation reaching decades-high levels, Canadian consumers remain well-positioned to weather any post-pandemic economic headwinds, according to some of the country’s most influential institutions. The nation’s banks are so confident that many of them are ramping up expansion plans and providing more support for already substantial consumer savings. “We’re still in a position where we see we see high liquidity in consumer accounts,” says Neil McLaughlin, RBC’s head of personal and commercial banking, in The Financial Post. “That’s cash on the sidelines that provides additional cushion for those customers…”

While consumer savings are still quite robust thanks to reduced spending during pandemic shutdowns, a new BMO survey finds that savings contributions are beginning to slow, largely because of inflationary pressure. “With the daily cost of living on the rise, it can be tough to prioritize saving,” says Gayle Ramsay, BMO’s Head of Everyday Banking and Customer Acquisition. The bank has introduced a no monthly fee Savings Amplifier Account, along with new Savings Goals tools embedded in their mobile banking app. “The Savings Goals feature is designed to simplify the process and ensure that our customers don’t lose sight of their plans.”

After healthy third-quarter earnings that bested industry estimates, several prominent banks are signaling that they’re ready to make this moment about growth.  As Canada Today reports: “The chief executives of several of Canada’s largest lenders outlined strategies for doubling down on profitable niches where they believe can gain an advantage in the fiercely competitive US market.” Two Canadian banks that have made their marks in the states include Toronto-Dominion Bank (TD) and Bank of Montreal (BMO), both of which undertook “big deals over the past year to become much larger south of the border,” leveraging excess pandemic capital.

Adding even more weight to optimistic outlooks, the National Bank of Canada and CIBC echoed the sentiment about strong economic pillars. For its part CIBC realized net interest income growth, with a “12% year-over-year surge in loan volumes,” the Financial Post reports, though mortgage lending is expected to slow. “TD’s Canadian and U.S. retail business also posted increased earnings, with margins up 8 basis points at the former and 41 basis points in the latter,” according to Reuters. TD reports it expects to complete the C$13.4 billion acquisition of First Horizon Corp in the US in the first quarter of 2023, pending regulatory approval.

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