Lower oil prices had pundits anticipating lower than expected earnings from Canada’s largest banks; however, Q2 profits for 2015 were anything but disappointing for the Banks.
Even as mortgage loan growth slows in volume, and interest rates continue to remain at historical lows, the Banks still continue to generate tonnes of profits from the interest payments paid by Canadians each month. Investment banking and capital markets profits contributed largely as underwriting revenues on market activity and mergers & acquisitions activity also picked up.
Home-owners, or Canadians otherwise tuned into the Canada mortgage landscape might recall that the Bank of Canada lowered their overnight lending rate by 0.25%, however; Canada’s big banks responded in kind by only lowering their prime rates by 0.15% – creating a 0.10% spread in the favour of the big banks – which is pure profit into the bank’s pocket.
Make no mistake, mortgage revenues from Canadian home-owners still remains a cash cow for Canada’s big banks.
Here are each individual bank’s profits for the second quarter:
– $2.5 billion for RBC
– $1.86 billion for TD
– $1.73 billion for BNS
– $999 million for BMO
– $911 million for CIBC
It would be disingenuous to say that the Big Banks don’t contribute to the Canadian economy – of course they do; however, when it comes to your mortgage, Canada’s biggest banks often leave something to be desired by offering mortgage products with tonnes of sizzle, but often little steak.
The biggest issues with the mortgage products offered by Canada’s largest banks are the use of ‘posted rates‘ designed to increase the amount of money Canadians pay in penalties, collateral mortgages which limit the options of home-owners come time to renew your mortgage and mortgage rates which force home-owners to negotiate – playing chicken with clients before offering competitive mortgage rates. These are aspects of mortgages that are rarely discussed during the financing process and are often ‘surprises’ to home-owners that they may or may not have accounted for. Often times the fine print can cost a Canadian home-owner thousands of dollars.