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The top banks of Canada, often referred in unison as the ‘Big Six’, released their latest financials this week, and all of them posted a significant increase in their net incomes. Reports noted that each of the lenders also managed to surpass analysts’ expectations in their latest quarterly earnings.
The six top banks of the country include Bank of Montreal (TSX:BMO), National Bank of Canada (TSX:NA), Royal Bank of Canada (TSX:RY), Bank of Nova Scotia (TSX:BNS), Canadian Imperial Bank of Commerce (TSX:CM) and Toronto-Dominion Bank (TSX:TD). All these lenders released their financials between February 23 and 25.
Since the coronavirus pandemic struck in March last year, Canada, along with the rest of the world, suffered a major economic crunch. The Bank of Canada (BoC), however, had stressed that the country’s financial backbone is resilient enough to survive the COVID-19 setback.
Bank Of Canada On Big Six’s Resilience
In its Financial System Review 2020 released in May, BoC noted while smaller lenders could face considerable risks, Canada’s Big Six banks hold sufficiently sturdy capital and mortgage insurance system to make it through the pandemic. In November again, BoC Deputy Governor Toni Gravelle reiterated that the lenders were capitalized well enough to tackle COVID-related debt repayments without putting their own solvency on the line.
Experts have also often pointed at the Canadian banking system’s survival through the 2009 Great Recession and the downturns of 1980s and 1990s as a stress test for its resilience to make it through COVID-19.
Has Canadian Banking System Survived The Pandemic Shock?
The banking sector is often an indicator of a country's economic growth and output. Ahead of their earnings releases, major analysts had reported that they would looking into the Big Six banks’ latest financials for any insight into Canada’s economic recovery from COVID-19. Now that they are out, the results show that all the six major banks have managed to surpass their pre-pandemic profit levels in the first quarter of 2021.
The bank executives, however, have cautioned that with the pandemic still lingering, a spike in soured loans remains a possibility in the coming months. With that in mind, the banks noted that they will stay “vigilant” for a possible third COVID-19 wave.
How Did Each Of The Big Six Banks Perform In The Latest Quarters?
- National Bank of Canada witnessed a 25 per cent year-over-year (YoY) jump in its net income of C$ 761 million for fiscal 2021’s first quarter.
- Royal Bank of Canada recorded a 10 per cent YoY increase in its earnings for Q1 FY21.
- Bank of Montreal’s first-quarter profits soared to C$ 2.02 billion, up from C$ 1.59 billion in Q1 FY20.
- Bank of Nova Scotia, aka Scotiabank, registered a net income of C$ 2.398 billion for the first quarter of fiscal 2021, up from C$ 2.326 billion in Q1 FY20.
- Canadian Imperial Bank of Commerce, aka CIBC, posted a profit of C$ 1.63 billion for the first quarter ending 31 January 2021, which was a 34 per cent jump YoY.
- Toronto-Dominion Bank secured a 10 per cent YoY increase in its adjusted net income of C$ 3.4 billion for Q1 FY21.
The banks noted that the increase in their latest earnings was, along with other factors, motored by lower bad loan provisions.
