TORONTO — Fewer employees and more money set aside for bad loans were two of the main themes of this quarter’s earnings as Canadian banks braced for what next year might bring.
Fourth-quarter results ended Friday showed the country’s banks are bracing for a potentially tough road ahead, while also showing that concerns about a recession appear to be fading.
This word was rarely mentioned in financial results announcements, and there was more talk than simply slowing growth due to central bank interest rate hikes. seems to have reached its peak And consumers as a whole are so far juggling higher payments.
“The economy is holding up very well. The economic forecast has been revised positively and I think that will be positive for us going into 2024,” Piyush Agrawal, BMO’s chief risk officer, said on Friday’s earnings call. Stated. .
He said there remains a big concern that a wave of mortgage renewals with high interest rates will burden future borrowers, but consumer balances remain on an upward trend and could weather the surge in payments. It pointed out.
Banks expect the economy to slow growth rather than shrink significantly, which is already happening. They are cutting costs, especially labor costs.
TD Bank said it would cut about 3% of its workforce, or about 3,100 positions, in the quarter, while Scotiabank and RBC are making similar cuts.
Other banks have been steadily reducing their workforce throughout the year in anticipation of the economic slowdown, by not replacing those who left their jobs.
CIBC reported that its workforce fell 5%, or about 2,400 positions, for the year, while BMO fell by nearly 1,600 positions from the third quarter to the fourth quarter, and National Bank on Friday reported a decline in its workforce of 1.6 per year. It was reported that the number of employees had been reduced. cents per year.
“We continue to carefully manage our workforce,” Marie-Chantal Gingras, National Bank’s chief financial officer, said on Friday’s earnings call.
“We remain focused on controlling costs and balancing business growth and investment.”
All banks are focusing on expenses and increasing provisions for three months of non-performing loans.
The biggest surprise was Scotiabank, which more than doubled its reserves to nearly $1.26 billion. Other companies are more modest in size, with TD Bank totaling $878 million, RBC $720 million, BMO $446 million, CIBC $541 million, and National Bank $100 million. It was $15 million.
Chief Executive Officer Scott Thomson said on Tuesday: “In line with our commitment to ensuring the bank is well-positioned to weather a period of low growth and uncertain macroeconomic conditions, we have reduced credit losses. “We have significantly increased our reserves.”
The bank emphasized that the funds it has set aside will help it weather the uncertain times ahead.
Laurent Ferreira, CEO of Banque Nationale, said: “Our defensive positioning and the profitability of our diversified business structure give us resilience and flexibility even in an unfavorable environment.” .
Most banks, except Scotiabank, also raised their dividends.
Fees and provisions related to cost cuts weighed on bank profits to some extent, but some banks reported higher profits than last year.
And while most banks emphasized the difficult environment, management also left room for optimism.
“If the situation slows down, we will respond accordingly,” CIBC CEO Victor Dodig said.
“If the situation improves and there is a strong possibility of a ‘soft landing’, we will take advantage of that as well.”
This report by The Canadian Press was first published Dec. 1, 2023.
Companies mentioned in this article: (TSX: NA; TSX:CM; TSX:BMO; TSX:RY; TSX:BNS: TSX:TD)
Ian Bikis, Canadian Press
