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The short interest in Canadian bank stocks remains at record levels.Michelle Siu/The Globe and Mail

The chief executives of Bank of Montreal and Canadian Imperial Bank of Commerce used remarkably different terms to describe the health of a domestic economy racked by tumbling oil prices, but both CEOs agreed that banks must adapt to a shifting financial landscape.

BMO's Bill Downe criticized financial media and analysts for being "singularly focused" on the downside impact of the depressed commodities market and its potential to drag down regional economies within North America, arguing that the level of apprehension is disproportionate to the evidence.

"What we know with confidence is that Canada's resource wealth has not gone away. A market price correction does not mean that an enviable national asset has suddenly become a liability," he told his audience at the bank's shareholder meeting in Toronto.

While low oil prices are clearly affecting economic activity in energy-producing regions and will force the bank to set aside more money to cover bad loans to energy companies, he noted that cheap fuel, low interest rates and steady job growth are driving strong consumer spending in most regions.

As result, he believes the Canadian economy will expand by nearly 2 per cent this year, with the U.S. economy expanding at a faster clip, underlining his relative optimism about the year ahead as some observers fret over the possibility of North America slipping into recession.

At CIBC's shareholder meeting in Vancouver, Victor Dodig was not one of those observers. Nevertheless, his points on the challenging economic environment for the bank appeared to put him at odds with Mr. Downe's more upbeat assessment.

"We face a number of headwinds, including a low-growth, low-interest-rate environment here in Canada, weak energy prices and investor unease," Mr. Dodig told his audience.

The price of crude oil is still down about 40 per cent over the past year, raising concerns among some analysts and investors that Canada's big banks will face rising loan-loss provisions at a time when their profit growth is slowing.

These concerns are reflected in bank share prices: Although they have rebounded recently, they remain 10 per cent lower than they were in 2014.

But if the chief executives of BMO and CIBC differed in the way they see the economy, they appeared to agree on how their industry is being transformed by technology and how they will meet that challenge.

"In every sector, innovative technology and breakthrough research point the way to the disruption of the status quo," Mr. Downe said.

Surviving this disruption, he suggested, would entail staying ahead of rising consumer expectations by shifting resources from traditional banking to financial innovation, as bank customers move online. He pointed to mobile apps, credit cards with biometric security features and BMO's recently unveiled SmartFolio, an online portfolio-management service that can compete with so-called "robo-advisers."

He expects that over the next few years, as much as half of customer interactions with the bank will migrate from branches to contact centres and mobile channels.

Mr. Dodig sees a similar urgency, but also pointed to the threat and opportunity posed by nimble financial technology firms, or fintech.

"Our industry is rapidly changing," he said. "Our challenge is to stay ahead of our competition – both the other large Canadian financial institutions and the fintechs who are looking to disrupt our model."

The solution, he said, is to increase the level of innovation within the bank but also collaborate with some fintech firms and partner with innovation labs across Canada.

"Clients today expect a lot more from their bank," Mr. Dodig said. "But they will only embrace innovative technologies if they integrate seamlessly into their lives, fulfill real needs and deliver additional value – and we need to make this happen quickly."

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 18/04/24 10:45am EDT.

SymbolName% changeLast
Bank of Montreal
Bank of Montreal
Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce
Altria Group
Realty Income Corp

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