Already the envy of the financial world, Canada’s banks are heading into their best period in at least 10 years, says Bill Downe, BMO’s CEO.
Over the next few years, the fundamentals of the banking business “are going to be as good as we’ve seen in a decade,” Downe said Tuesday as BMO kicked off the industry’s fourth-quarter earnings season by topping expectations.
Despite that optimistic talk, investors showed just how cautious they remain, pushing down BMO shares slightly on a day when most bank stocks also took minor dips.
Among the reasons for the decline: BMO’s results show that Canadians are continuing to struggle with their credit card debts – and they also suggest that the stellar trading profits domestic banks have posted in recent quarters are coming to an end.
Indeed, analysts questioned whether BMO’s target of 10% profit growth is too ambitious in the wake of the financial turmoil that has pounded financial institutions around the world and a recession that has hit consumers in their wallets.
But Downe said the exit of a number of non-bank competitors in the lending market means that the banks should be able to earn more on their loans. “I think that the prospects for good asset growth at better margins over the next couple of years are quite realistic,” he told analysts on a conference call, adding that the banking system is absorbing more than $1 trillion worth of short-term financing previously done by other lenders.
Click here to read the full Globe and Mail article.
Canadian home resale prices rose for a fifth straight month in September on gains in five of six major metropolitan markets surveyed, according to a report released today.
The Teranet-National Bank Composite House Price Index, which measures price changes for repeat sales of single-family homes, showed overall prices were up 1.3% in September from August, the smallest rise in four months.
Vancouver, where prices were up 2.1%, had the biggest monthly rise, followed by Toronto, up 1.5%. Calgary posted a 0.9% gain, while Halifax rose 1.7%.
Montreal was the only metropolitan area that reported a decline in the month, down 0.2%, although the report said the fall was “not due to a deterioration of market conditions.” It said new listings in the city have slipped following a rise in home sales every month since May, citing statistics from the Greater Montreal Real Estate Board.
Click here to read the entire Financial Post article.
The cost of homeownership in Canada became more expensive for the first time since the spring of 2008 across all housing segments, according to the latest housing report released today by RBC Economics Research.
“Home affordability deteriorated in all provinces and major markets in Canada due to a slight rise in key mortgage rates and appreciation in property values,” said Robert Hogue, Senior Economist, RBC. “Despite this increase in homeownership costs, affordability measures have still shown improvement from a year ago.”
The RBC Housing Affordability measure captures the proportion of pre-tax household income needed to service the costs of owning a home. During the third quarter of 2009, the RBC Affordability measure at the national level rose across all housing types (the higher the measure, the more expensive it is to afford a home).
The benchmark detached bungalow moved up by 1% to 40.2%, the standard townhouse rose by 0.7% to 32.3%, the standard condo climbed by 0.5% to 27.6% and the standard two-storey home increased by 1.2% to 45.8%.
The RBC report found that demand in the housing market has outgrown supply since the rebound started last winter, leading to a much more competitive market and widespread increases in home values across many parts of the country.
Results of the TD Canada Trust Generational Homeownership Survey released on Monday reveal the younger the owner, the older the home.
Almost half of Canadians (48%) aged 18-34 years old bought a first house that was at least 21 years old, according to the TD Canada Trust survey. On the other hand, those 55+ chose newer homes with only one-quarter (27%) of that group purchasing a property 21 years or older for their first home.
The survey was conducted to understand the differences in behaviours and attitudes of Canadians across the generations when purchasing their first home. “The TD Canada Trust Generational Homeownership Survey showed that one of the most significant differences in behaviour for first-time homebuyers across the generations is the age of the home they purchased,” says Chris Wisniewski, Group Product Manager, Real Estate Secured Lending, TD Canada Trust. “This behaviour suggests today’s first-time homebuyers are looking for cost-effective options, which in urban centres are often older homes.”
Possibly looking for a more affordable option, younger Canadians were the most willing to take on a fixer-upper (35%) as their first home compared to 24% of those now 55+ who did the same when they were first-time homebuyers.
Click here to read more about the TD Canada Trust survey results.
Canadian corporations earned $54.1 billion in operating profits in the third quarter, up 7.9% from the previous quarter after three straight quarterly declines, Statistics Canada said today.
Profits in the non-financial industries increased 10.4% from the second quarter to $41.7 billion. Profits in the financial industries were relatively flat as firms reported $12.4 billion in profits, up 0.3%.
Overall gains were widespread, as 18 of 22 industries reported higher profits in the third quarter.
Together, profits for oil and gas, and petroleum and coal increased 20.4% to $5.9 billion, marking their first increase in four quarters.
Manufacturers reported $9.4 billion in operating profits in the third quarter, up 28.6% from the second quarter. Motor vehicle and parts manufacturers reported an operating loss of $100 million – but this compares with an operating loss of $1 billion in the second quarter and a loss of $1.7 billion in the first quarter.
Transportation and warehousing earned $2.8 billion in profits in the third quarter, up 14.8%.
Bowing to pressure from home builders, the British Columbia government is promising to provide a bigger break on the new harmonized sales tax (HST) to new home buyers.
The province announced earlier this year that BC will move to the HST next July, combining the 5% GST with the province’s 7% sales tax.
But home builders argued the tax would stifle new home sales at a time when the market is still reeling from the recession.
Finance Minister Colin Hansen, who said early last week he could not follow Ontario’s lead in offering new breaks on the HST, said last Thursday in a statement: “We heard the concerns from consumers and industry about how the HST might affect home buyers.”
The threshold will rise to $525,000, instead of the $400,000 that was initially proposed. It means that, on average, purchasers of new homes up to $525,000 pay no more tax than they would under the current tax regime.
The shift to the HST in BC caused a political firestorm because the BC Liberal party stated during the spring election campaign it was not planning to adopt the tax. After the election, in the face of collapsing revenues, Hansen said he decided BC would benefit from the shift, which will bring $1.6 billion in transfers from the federal government. – Globe and Mail
Your first-time buyer clients have a chance to win one of two gift cards from Sears worth $250 apiece by filling out the following survey for Buying Your First Home magazine (a consumer publication owned by CMP parent company, KMI Publishing & Events Ltd): http://yourfirsthomecanada.ca
The survey targets readers of the publication, but the magazine is also interested in hearing from those who haven’t read it, but are planning to buy their first home.
Recently, the real estate industry has dominated the headlines. 
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