Canadian banks continue to be a long-term opportunity despite recent headwinds (2024)

FAQs

Canadian banks continue to be a long-term opportunity despite recent headwinds? ›

Canadian banks continue to be a long-term opportunity despite recent headwinds. In every recession and timeframe analyzed, Canadian bank stocks outperformed the broader S&P/TSX Composite. Given their recent quarterly earnings, Canadian banks are clearly facing a multitude of challenges.

Thankfully, experts say Canadian banks are significantly less vulnerable to failure than our neighbours' to the south, for many reasons, and your money in a Canadian bank will continue to be safe.

Canadian consumers also help to keep banks profitable by paying for things like chequing accounts, and paying greater fees than U.S. consumers, Cheng says. More concentrated regulation is another key factor that experts cite to explain stronger Canadian banking stability.

Canadian domestic systemically important banks' (D-SIBs') profit growth is likely to remain under pressure in 2024 from rising provisions for loan losses and still-high expenses, although growth is moderating.

Well-regulated sector

The Canadian banking sector is renowned for having a lot of oversight. This, coupled with their conservative lending policies, make it a safe and secure sector to invest in.

The claim that "the entire banking system in Canada is shutting down" is not accurate. "The entire system is not closing down," Michael Geist, a law professor at the University of Ottawa, told PolitiFact.

CDIC protects eligible deposits at over 80 member institutions, up to a maximum of $100,000 per depositor and per insured category. Eligible deposits include things like savings accounts, chequing accounts, and term deposits of 5 years or less. These deposits must be payable in Canada and held in Canadian currency.

Unsurprisingly, Canada's Big 5 Banks take the top spots for most reputable banks. Taking the number one spot, with a reputation score of 36, is RBC, or Royal Bank of Canada. RBC offers a variety of banking services for individuals and businesses.

Conclusion. Keeping your money in a CDIC-insured bank and not going over $100,000 in account value protects your money. The Canadian banking system is so well-regulated that bank failure is unlikely. The assurance of a CDIC-insured bank can free you to find the right account for your financial needs.

The banks' expectations for net interest margins/income for 2024 ranged from stable to slight expansion. The Canadian banks have strong capital ratios and could deliver more capital to shareholders in 2024 through share buybacks or dividends, in our view.

What is the future of Canadian banks? ›

Canada's banking industry is coming through yet another challenging period. Capital requirements, evolving risks, regulatory changes, technological disruption and macroeconomic volatility continue to complicate Canadian banks' growth agendas as they navigate the early months of 2024.

EQB Inc (TSX:EQB) is Canada's fastest-growing bank.

Canada's financial system is one of the safest and strongest in the world.

Banks rarely fail in Canada, but how many billions of dollars would be needed if there's trouble? Canada Deposit Insurance Corporation funds that are earmarked for protecting depositors when things go awry — and when all other resolution options are exhausted — are not at their target level.

TD Bank. Toronto-Dominion Bank (TSX:TD) is the “safest” Canadian bank going by capitalization. Today, it has a 16.2% common equity tier-one (CET1) ratio. The CET1 ratio is cash plus equity divided by all risk-weighted assets.

The only difference is that the Canadian banks have a larger share of loans. This is one of the main factors that makes them safer than American banks, even the larger ones. The Canadian financial system and the American financial system aren't really that different.

Conclusion. Keeping your money in a CDIC-insured bank and not going over $100,000 in account value protects your money. The Canadian banking system is so well-regulated that bank failure is unlikely. The assurance of a CDIC-insured bank can free you to find the right account for your financial needs.

Republic First Bank reported unrealized securities losses in excess of its equity as early as June 2022. State regulators closed Republic First Bank in April 2024, marking the first bank failure of the year.

In a presentation to investors, CIBC said it has cut as much of five per cent of its full-time employees in its past fiscal year. That's almost 2,400 people. RBC and Scotia have previously announced similarly sized layoffs.