Fourth quarter results that wrapped on Friday showed the country's banks were preparing for a potentially tougher road ahead, but also that fears around a recession look to be fading.
The word hardly came up on earnings calls, with more talk instead of simply slower growth as the central bank rate hikes appear to have peaked and consumers on the whole are so far managing through higher payments.
"The economy has been holding up very well. You're seeing positive revisions to economic forecasts, and I think these will play out to our benefit as we go into '24," said BMO chief risk officer
While there is still significant concern of borrower strain ahead as waves of mortgage renewals will be coming at higher rates, he noted that consumer balances remain elevated to help see them through the jump in payments.
Instead of a significant shrinking of the economy, banks are expecting — and already seeing — slower growth. They have been cutting back on expenses, most notably around staffing.
Other banks have been steadily reducing staffing levels, in part by not replacing people who leave their roles, across the year in anticipation of the slowdown.
CIBC reported its head count went down by five per cent, or about 2,400 positions, over the year, BMO pulled back by close to 1,600 positions from the third to fourth quarters, while
"We continue to prudently manage head count," said
"We remain focused on controlling costs, as well as on balancing business growth and investment."
Along with a focus on expenses, all banks also set aside more provisions for bad loans during the three-month period.
Scotiabank surprised the most with a more than doubling of provisions to nearly
"In keeping with our commitment to ensure the bank is well positioned to manage through periods of slow growth and uncertain macroeconomic times, we have significantly increased the allowances for credit losses," said chief executive
Banks emphasized that the money set aside will help them manage through the uncertain times ahead.
"Our defensive positioning and the earnings power of our diversified business mix provide us with resilience and flexibility in a less constructive environment," said
Most banks also raised their dividend, with the notable exception of Scotiabank.
Charges related to expense reductions and the provisions put some pressure on bank earnings, but several reported higher earnings than last year.
And while most banks emphasized the challenging environment, executives did also leave room open for optimism.
"If things go slow, we'll manage accordingly," said CIBC chief executive
"If things turn better, and there's a very good chance that we have this 'soft landing,' we will capitalize on that as well."
This report by The Canadian Press was first published
Companies in this story: (TSX: NA; TSX:CM; TSX:BMO; TSX:RY; TSX:BNS: TSX:TD)
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