Canada’s banks least affected by recession
Over the last year, our lingering economic problems have been largely attributed to banks loaning out too much money. It seems that many of these institutions worldwide have suffered significant consequences, yet one country seems to be comparatively unaffected: ours. In spite of the rumours, Canadian banks have actually maintained a relatively stable position. Although the Royal Bank of Canada suffered a decreased profit of $1.25 billion from last year, its more than $1 billion profit in the three months ended January 31, 2009 is still very impressive in the economic context.
Meanwhile, satisfactory profits of $712 million for TD Bank, $147 million for CIBC, and $69 million for National Bank have been reported, and Scotiabank and Bank of Montreal have been expected to remain in the black. These numbers are in opposition to other countries’ banks like Citigroup in the United States, which lost over $27 billion thus far, and the Royal Bank of Scotland, losing $53 billion US in the latest fiscal year and receiving $28 billion as a bailout from the British government. In many cases, banks are likely to become nationalized to be saved from complete destruction. Together, American banks have lost $26 billion in the fourth quarter and, according to Bloomberg News, banks in Europe have lost about $321 billion since early 2007.
Yet while Canadian banks have managed their finances quite well compared to others, they have not come away unscathed by the economy either. Real estate and business depletions are only expected to continue, for instance. The federal government has gotten involved as well, providing assistance to Canadian banks to improve liquidity, including $200 billion in mortgages and other debt. Royal Bank alone has set aside $747 million for bad loans they extended, which is twice the number of last year.
There are some bleak predictions about the future of many American banks. While Canada’s have not been immune to the recession, their relative success – including a seven percent yield average – should not go unnoticed.
For more information about how BDO can help with with your Credit Union or Banking system please contact our National Credit Union and Banking Leader Claudine Cordeiro at 807.468.5531 or ccordeiro@bdo.ca.
