The long called for disappearance of growth in Canadian banking appears to be here.
Banks held the slowdown at bay for a few quarters longer than expected, but the inevitable seems to be happening.
As the fiscal second-quarter results roll in for the country's large financial institutions – four of the six big banks have now reported – nothing looks as good as it did last quarter in the domestic banking market. Revenue and profit growth are screeching to a halt. And trends in bad loans are not friendly either.
Total revenue growth in Canadian banking for Toronto-Dominion, National Bank and Bank of Montreal slowed to 1.6 per cent in the second quarter from 3.55 per cent in the first quarter. (Bank of Nova Scotia's numbers were excluded because its big acquisition of ING's Canadian banking operations skewed its Canadian banking results.) Total Canadian banking net income for those three banks grew 2.7 per cent in the second quarter from the second quarter of 2012, down from an 8.4 per cent increase in the first quarter.
Total provisions at National, TD and BMO declined 7.8 per cent in the second quarter from the year earlier. But in the first quarter, provisions dropped almost 14 per cent.
Looking at the numbers sequentially – from the end of the first quarter to the end of the second quarter – the numbers are starker.
Sequentially, revenue for the three actually declined from the first quarter's $4.93-billion to $4.83-billion in the second quarter.
Total net income declined from $1.556-billion in the first quarter to $1.473-billion in the second quarter.
The result is that provisions at the end of the second quarter, at $451-million, were higher than three months before when they were $416-million. That's an 8.4 per cent increase.
The upshot? Look for more deals as banks try to find growth at home, or offset the slowdown with more abroad.
(Boyd Erman is a Globe and Mail Reporter & Streetwise Columnist.)
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