Just a week after earnings season, you would assume Canada's banks don't have much else to say about their operations. However, the Big Six's current and incoming chief executive officers all spoke at Bank of Nova Scotia's financial markets conference on Wednesday, and they all laid out their growth strategies for the coming year, hoping to lure new investors.
Each presentation was roughly 25 minutes long. To save you from watching each, here the the key facts you need to know.
Royal Bank of Canada
After a campaign to somewhat distance the bank from capital markets, CEO Gord Nixon has changed his tune. Now wholesale banking, particularly in the U.S., is marketed as a growth driver. There's a major reason for this change of heart. Before, the capital markets division was boosted by a major trading operation. That still exists, but isn't nearly the same size. RBC – and other banks – had to scale back because of regulatory changes and new capital rules. Today the capital markets arm is driven by lending and origination – the U.S. lending book has doubled in size since 2008, after spending the previous eight years shrinking. Wealth management is another major focus, particularly in the high-net worth space, and RBC would like to expand its offering of global equity funds.
After a record quarter for its Canadian personal and commercial arm, TD hopes to replicate this success in the U.S. The American economy is on the mend, and the bank's deposits south of the border are climbing. The key task now is finding people and businesses to lend to. TD's U.S. deposits total roughly $185-billion, but its loans add up to just $100-billion. The bank's done some buying to increase lending – such as its acquisitions of the Target U.S. credit card portfolio – but incoming chief executive officer Bharat Masrani said he will "seriously look" at other assets that come available. Expenses are another major focus. Despite the record results, TD thinks there's good reason to conduct a major bank-wide review to see where they can cut costs because there's no guarantee that revenues stay so strong.
Bank of Nova Scotia
No matter how hard you push CEO Rick Waugh, he refuses to say his bank relies on one unit over another. At Scotia, it's all about diversity, and each reason hold promise. Through Mr. Waugh acknowledged loan growth is moderating in Canada, credit metrics such as delinquencies and loan losses are all in solid shape. Internationally, Latin America is still the major hope, but it's a long-term bet; Scotia isn't trying to ramp up in countries such as Colombia and Chile too quickly. Instead, the bank will keep offering safer products, such as auto loans, credit cards and insurance. And if other banks in these regions are punished for a different asset mix, he said it will only leave the door open for opportunities. "I love buying cheap," he said.
Bank of Montreal
Having just reported record quarterly earnings in Canadian personal and commercial banking, BMO's major focus is to get its U.S. equivalent firing on all cylinders. The bank recently launched a major marketing campaign in the midwest to get U.S. households familiar with the BMO brand, and CEO Bill Downe hopes that will help the bank expand in urban markets. But while U.S. deposit growth is healthy, "it's the commercial banking, the mid-market business that for the next couple of years is going to be the real strong source of growth," he said. In Canada, BMO's pushing hard to expand its retail operation – something it's had success with in the past few quarters as it targeted mortgage growth. To help, the U.S. marketing campaign is about to be unveiled here, albeit with some changes for the local market.
Canadian Imperial Bank of Commerce
Wealth management is where it's at. After buying American Century Investments and Atlantic Trust Private Wealth Management, CIBC is still on the hunt for more wealth management assets – particularly the south of the border. "Much of the growth that we are planning will come from the U.S.," chief executive office Gerry McCaughey said. CIBC has set a target of getting 15 per cent of its earnings from wealth management, and right now the bank's at the 11 per cent mark. CIBC is also investing $134-million – spread out over multiple years – to revamp its retail arm's back office systems. Mr. McCaughey referred to it as a "catch up investment" that is necessary to increase sales force capabilities for products such as mortgages. The one area that was barely mentioned: credit cards. That's because CIBC is still in negotiations with TD to hammer out details on sharing the Aeroplan account. But on the bank's earnings call last week, CIBC said it was still planning on launching a brand new travel rewards card.
National Bank of Canada
Investors have long punished National for its Quebec focus and its strength in wholesale banking. CEO Louis Vachon said the recent record earnings prove he has no reason to change course. The bank's fundamentals in these areas are strong, too. Quebec has lower household debt levels than the rest of the country, in large part because its housing markets outside of Montreal aren't too hot, so buyers don't need massive mortgages. Plus, more than half of its wholesale banking revenues come from outside Quebec, so it helps to diversify the bank's overall earnings mix. In other areas, National has big hopes coming out of its acquisition of TD Waterhouse Institutional Services, which provides back office support to independent wealth managers. Mr. Vachon also believes his retail banking arm will benefit from the money he's plowed into it, in order to upgrade IT systems, revamp or open branches outside Quebec and boost marketing.