Banks Post Enormous Profits
CBJ — Recession? What recession? Canada’s six largest banks combined for a yearly profit of about $15 billion with three banks boosting stock dividends.
For the fiscal year the Big 6 earned almost $35 billion, with Royal Bank’s record $10-billion profit leading the way.
How do banks manage to continue their record-breaking profits? A big part of it is called expense management, or cutting staff, if you prefer. As example, TD chopped about 1,600 jobs in 2015 while Scotiabank handed pink slips to another 1,140, and that’s just since the summer. RBC reduced its full-time ranks by 528, mostly by not replacing workers who either quit or retired.
In addition to trimming the ranks of the employees, banks with large U.S. operations have benefited, as Canada’s lower dollar meant their U.S. earnings were worth even more. TD, for example, now has more branches in the U.S. than in Canada.
Banks also saved some money when they decided not to pass along all of the half-percentage-point cut the Bank of Canada made earlier this year in its key lending rate. Banks dropped their prime lending rates by a total of just 0.30%. Then of course are the service fees. Take money out of another financial institutions’ ATM and you’ll be hit with a fee ranging from $1.50 to $3. Multiply that by several million each day and then times that by 365 and you’ve got yourself a nice revenue stream.
However, while everything looks rosy for the moment, 2016 may not be so kind. Most banks are making significant investments in technology to power their efficiency and protect their market share from new financial technology competitors, like Apple and Google. It’s still too early to say how that little tussle multi-billion-dollar will play out.