29 Nov

Scotiabank profits fall in Q4

General

Posted by: Frank Fik

Scotiabank saw its reported net income fall on a yearly basis in the fourth quarter, although overall it closed out the fiscal year up over 2021.

The banking giant revealed on Tuesday that it took in $2.09 billion in Q4 compared with $2.56 billion during the same period last year, with its $10.17 billion net haul for the fiscal year comparing favourably against the $9.96 billion it reported in 2021.

Adjusted earnings per share (EPS) for the year were also up over 2021, at $8.50 compared with $7.87, while adjusted EPS for the quarter were higher than expected – $2.06, against analysts’ average expectations of $2, according to Refinitiv data.

Scotiabank’s Canadian banking division saw a 15% increase in adjusted earnings over 2021, with significant growth in residential mortgages (14%) and business banking loans (21%), in addition to lower provisions for credit losses, helping account for that improvement.

The bank said that “challenging market conditions” had seen declines in assets under management, with capital markets also bearing the brunt of that changing climate.

Its international banking segment posted a “strong rebound” in adjusted earnings this year, Scotiabank said, with adjusted earnings ($2.45 billion) up 32% over 2021.

Each of Canada’s other Big Six banks – TD, Royal Bank of Canada, CIBC, Bank of Montreal and National Bank – are set to release their own fourth-quarter and full-year results in the coming week.

Published by:

Fergal McAlinden the current Canada News Editor for Canadian Mortgage Professional,

24 Nov

Residential Mortgage Commentary – Inflation report offers hope of interest rate relief

General

Posted by: Frank Fik

The latest Statistics Canada inflation numbers have given some market watchers hope that the Bank of Canada will slow or, perhaps, even pause interest rate increases.

The Consumer Price Index, or “headline inflation”, held steady from September to October at 6.9% on a year-over-year basis.  Lower food price inflation off-set higher gasoline prices.  Another welcome sign showed core inflation, which factors out volatile items like food and fuel, slowed in October to 5.3%, year/year, down from 5.4% in September.  The Bank of Canada uses the core inflation reading when making its interest rate decisions.

However, those numbers will likely come as cold comfort to homeowners and homebuyers who have faced some sharp, inflationary increases.

StatsCan reports mortgage interest costs jumped by 11.4% in October – the biggest y/y increase since February 1991 (11.7%).  Property taxes also rose sharply, climbing 3.6% compared to 1.5% a year ago.

StatsCan’s “homeowners’ replacement cost index’, which relates to the price of new homes, dipped to 6.9% in October, down from 7.7% in September. This measure has been declining since May (11.1%).

Statistics Canada offers a simple, plain-language explanation of how housing, or “shelter costs” fit in to the inflation calculation here.( https://www150.statcan.gc.ca/n1/daily-quotidien/221116/dq221116a-eng.htm)

Looking ahead to December 7th and the BoC’s last interest rate announcement for the year, most analysts expect one more 25 to 50 basis-point increase.

Published by First National Financial LP

14 Nov

Residential Mortgage Commentary – Employment, inflation and interest rates

General

Posted by: Frank Fik

The news on the economy, inflation and the future of interest rates has been mixed over the past week or so.  Most of the recent analysis has centered on employment.

Market watchers were surprised by the latest job numbers which shot up by 108,000 in October.  The unemployment rate did not move however, holding at 5.2%, as the number of people looking for work went up.  Wages are also increasing.

Normally these would be considered good things, signs of a strong and growing economy.  But in times of high inflation they create a paradox: more jobs at higher wages means more consumers spending more money, thereby increasing demand in an economy that does not have enough supply, and further driving inflation.

It is the situation that Tiff Macklem, Governor of the Bank of Canada wants to reverse.

“The labour market is very tight,” says Macklem.  “That’s a symptom of an economy that can’t keep up … can’t produce all the goods and services Canadians want to buy.”

Increasing interest rates is the Bank’s key way to make that happen.

Inflation figures due this week could offer some clues to what the Bank will do next.  But, for now, the bias is toward more interest rate increases.

“We do think we still need to raise rates a little bit further,” Macklem told CBC News. “How far, we will see.”

Published by First National Financial LP